Asian petrochemicals shares tumble after US Fed interest rate hike

Nurluqman Suratman


SINGAPORE (ICIS)–Asian petrochemical shares fell on Thursday as fears of a global recession grew after the US Federal Reserve (Fed) raised interest rates by 75 basis points (bps) to the highest level since early 2008.

At 03:15 GMT, Mitsui Chemicals was down 0.82% in Tokyo, PetroChina was 0.88% lower in Hong Kong and SK Innovation fell by 2.80% in Seoul.

Japan’s benchmark Nikkei 225 fell by 0.97%, South Korea’s KOSPI Composite slid by 1.04% and Hong Kong’s Hang Seng was 1.44% lower.

Company/Stock Exchange  % Change
Nikkei 225 (Japan) -0.97%
Asahi Kasei -0.36%
ENEOS Holdings -0.54%
Mitsubishi Chemical Holdings -0.62%
Mitsui Chemicals -0.82%
China Petroleum & Chemical Corp 0.00%
PetroChina -0.88%
KOSPI Composite Index -1.04%
OCI Company 1.98%
SK Innovation -2.80%
LG Chem -0.48%
Lotte Chemical -0.88%
Hanwha -2.26%
TSEC weighted index (Taiwan) -1.11%
Formosa Petrochemical Corp -2.23%
Nan Ya Plastics -1.49%
Formosa Chemicals & Fibre Corp -0.59%
STI Index (Singapore) -0.19%
Wilmar International 0.00%
FTSE Bursa Malaysia KLCI (Malaysia) -0.28%
SSE Composite Index (Shanghai, China) 0.03%
Jakarta Composite Index (Indonesia) -0.04%
Chandra Asri Petrochemical -1.90%
SET Index (Thailand) -0.31%
PTT Global Chemical -0.56%
Indorama Ventures -0.61%
IRPC 0.62%
Siam Cement -2.67%
Thai Oil 2.27%

The Fed overnight accelerated its rate hike cycle by lifting the benchmark federal funds rate by a third consecutive 75bps to 3.00-3.25% – the highest in 14 years.

“We have got to get inflation behind us. I wish there were a painless way to do that. There isn’t…Higher interest rates, slower growth and a softening labor market are all painful for the public that we serve,” Fed chairman Jerome Powell told a news conference.

“But they’re not as painful as failing to restore price stability and having to come back and do it down the road again.”

The Fed now forecasts that interest rates would reach to an even faster pace of 4.4% by the end of this year and extend further to 4.6% by the end of 2023.

However, Powell noted that there had been no decision taken on the size of the rate increase at the November Fed meeting and further emphasised that a large group of Fed officials preferred to only lift rates by 100bps by end-2022.

Further dampening investor sentiment was the announcement by Russian President Vladimir Putin on Wednesday for a “partial mobilisation” for its military campaign in Ukraine, the first since World War II that will see 300,000 reservists called up.

Putin also vowed to annex territories his forces are occupying in Ukraine, in a move which he described as “urgent, necessary steps to defend the sovereignty, security and territorial integrity of Russia.”

The US dollar surged to a fresh two-decade high on Thursday after the Fed’s hike and Powell’s hawkish outlook.

The US Dollar index (DXY), which tracks the US greenback against six major peers including the euro and Japanese yen, hit a fresh 20-year high of 111.73 on Thursday.

Crude oil prices rebounded on Thursday on supply concerns after closing lower in the previous session amid volatile trade.

Worries concerning the revival of the Iran nuclear deal applied upwards price pressure.

Product (03:05 GMT Thursday) Latest Previous Change
Brent November 90.32 89.83 0.49
WTI November 83.39 82.94 0.45

Thumbnail photo:  A currency dealer works in front of a display screen (Source: YONHAP/EPA-EFE/Shutterstock) 

Focus article by Nurluqman Suratman

Click here to read the Ukraine topic page, which examines the impact of the conflict on oil, gas, fertilizer and chemical markets


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