China petrochemical shares gain; yuan weakens post-holiday

SINGAPORE (ICIS)–China’s petrochemical shares were higher on Monday, leading gains in Asia, while the yuan (CNY) weakened after the central bank tweaked its foreign exchange policy.

The Chinese markets now on their second session of return after a long break, were playing catch-up to the ongoing global equity rally on expectations of a bigger coronavirus aid package in the US.

At 03:15 GMT, Sinopec Shanghai Petrochemical Co was up by 4.11% and PetroChina Co was 0.44% higher in Hong Kong. The Hang Seng Index was up by 1.57%.

In Shanghai, China Petroleum & Chemical Corp was up by 0.51%. The Shanghai Composite was by 2.07%.

In Japan, Asahi Kasei Corp was up by 0.85% while Mitsubishi Chemical rose 0.29%. The Nikkei 225 was 0.32% lower.

In South Korea, LG Chem was down by 1.59% while Hanwha Corp was 2.26% higher. The KOSPI Composite Index was up by 0.53%.

Company/Stock Exchange (at 03:15 GMT)	% Change
Nikkei 225 (Japan)	-0.32%
Asahi Kasei Corporation	0.85%
JXTG Holdings, Inc.	-0.18%
Mitsubishi Chemical Holdings Corporation	0.29%
Mitsui Chemicals, Inc.	0.42%
Hang Seng Index (Hong Kong)	1.57%
Sinopec Shanghai Petrochemical Company Limited	4.11%
PetroChina Company Limited	0.44%
KOSPI Composite Index (South Korea)	0.53%
OCI Company Ltd	-0.78%
SK Innovation Co., Ltd.	3.11%
LG Chem, Ltd.	-1.59%
Lotte Chemical Corporation	-0.87%
Hanwha Corporation	2.26%
TSEC weighted index (Taiwan)	0.41%
Formosa Petrochemical Corporation	0.00%
Nan Ya Plastics Corporation	-0.16%
Formosa Chemicals & Fibre Corporation	1.16%
STI Index (Singapore)	0.44%
Wilmar International Limited	0.43%
Olam International Limited	0.76%
FTSE Bursa Malaysia KLCI (Malaysia)	-1.07%
SSE Composite Index (Shanghai, China)	2.07%
Jakarta Composite Index (Indonesia)	0.74%

Investors were monitoring the Chinese yuan’s movements after the People’s Bank of China (PBoC) announced that banks no longer need to set aside cash as reserves when purchasing foreign exchange for clients in the forward market, with immediate effect.

“This reserve margin requirement was previously instituted back in August 2018 when the yuan (CNY) first fell towards 6.90 during the intensifying US-China trade conflict,” Singapore-based UOB Global Economics & Markets Research said on Monday.

“Given the strong gains in the CNY in recent weeks, the removal of this reserve margin requirement should come as no surprise and is seen as a signal by the PBoC to slow down the pace of the CNY gain,” it said.

A strong currency weakens exports.

The CNY was trading at 6.71 to the US dollar at 03:25 GMT on Monday.

The Chinese markets were closed on 1-8 October for Mid-Autumn and National Day holidays.

US President Donald Trump reversed his earlier stance and voiced support for a huge coronavirus aid package, which is estimated to be at least $1.6tr.

The US, which is the world’s biggest economy, is the worst hit by the pandemic with a total tally of infections nearing 8m.

India, an emerging market giant in Asia, now has the second highest coronavirus cases in the world at above 7m, with additional 74,383 infections recorded on 11 October.

There are concerns that the south Asian country’s coronavirus cases would exceed those in the US in the next few weeks given the rapid surge in infections in the past two months – 3m cases in September and 2m in August.

The Reserve Bank of India kept its policy repurchase (repo) rate unchanged at 4.0% on 9 October, in line with market expectations and the second time that the central bank has kept its rates unchanged following the 40 basis points cut on 22 May this year.

The emerging market giant is hurting from continued spikes in coronavirus infections – which constrain domestic economic activity – and a lacklustre external environment.

Focus article by Nurluqman Suratman

Photo: At a port in Jiangsu Province, China 5 October 2020. (By Sipa Asia/Shutterstock)

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