Asia petrochemical shares tumble as China stimulus disappoints

SINGAPORE (ICIS)–Shares of petrochemical companies in Asia tumbled on Monday as China’s much-awaited stimulus measures failed to impress markets, while the US is likely to put up more trade barriers against the Asian giant following the re-election of Donald Trump as president.

• Asian equities defy Wall Street’s 8 Nov gains; oil prices fall
• China Oct consumer inflation at 0.3% compared with 0.4% in Sept
• China central bank cuts yuan reference rate

At 06:53 GMT, crude futures were down a few cents, with Brent crude down 6 cents at $73.93/barrel, and US crude down 5 cents at $70.33/barrel.

At 04:00 GMT, Mitsui Chemicals was down close to 2% and Sumitomo Chemical fell by almost 2% in Tokyo, while the benchmark Nikkei 225 was down by 0.39% at 39,347.79.

In Seoul, LG Chem was rangebound, with South Korea’s KOSPI Index slumping by more than 1%.

In Hong Kong, PetroChina was down more than 4% as the Hang Seng Index slipped by 2.2% to 20,270.77.

In Kuala Lumpur, PETRONAS Chemicals Group (PCG) slumped by nearly 5% while the stock market index dipped by 0.3%.

On 8 November, US stocks rallied after Trump’s re-election as market players expect corporate tax cuts, deregulation and larger fiscal deficits under his administration starting 2025.

The S&P 500 rose by 0.4% to 5,995.54 on 8 November, while the Dow Jones Industrial Average was up by 0.59%, and the Nasdaq Composite closed 0.10% higher.

THE TARIFF ISSUE
Threats of potential tariffs of 20% on all imported goods and a rate of 60% or more on Chinese are worrying investors in Asia.

“The spectre of tariffs [is] likely to lead to somewhat lower global growth, higher US inflation, possibly fewer Fed[eral Reserve interest] rate cuts, stronger USD [US dollar], higher bond yields amid a general rise in geopolitical and trade tensions,” Japan-based Nomura Global Markets Research said in a note on 10 November.

However, Nomura emphasized that the timing of Trump’s policy as well as tariffs are still “major unknowns”, and that milder policy action is likely to offset initial price-action.

The effects of potential tariffs have already led to frontloading exports to the US in October, a trend likely to continue into H1 2025.

Chinese exports in October were up nearly 13% year on year amid a rush to ship goods ahead of any trade protectionist move by the US once Trump is back in power next year.

On Monday, the People’s Bank of China (PBOC) adjusted down its daily reference rate at yuan (CNY) 7.1786 to the US dollar, a decline not seen since late 2023.

A weaker yuan would help boost competitiveness of Chinese exports amid threats of tariffs.

CHINA MEASURES FAIL TO LIFT DOWNBEAT MOOD
Investor sentiment was dampened by a weaker-than-expected stimulus measures announced by China following the National People’s Congress (NPC) meeting last week.

The country’s top legislative body approved a bill on raising ceilings of local government debts, while allowing local governments to issue yuan (CNY) 6 trillion ($838 billion) of new bonds to swap with off-balance sheet debts, China finance minister Lan Fo’an had said on 8 November.

Lackluster growth despite a stimulus package introduced in late September and a lack of further measures to encourage spending continues to weigh on sentiment.

China’s consumer prices in October inched up by 0.3% year on year, slowing from the 0.4% growth in the previous month.

The focus will now be on Singles’ Day, China’s equivalent of Black Friday in the US on Monday, where value-for-money purchases and online shopping will hopefully bolster overall consumption.

“We suspect that given the shift toward value-for-money purchases and online shopping, we’ll continue to see solid growth numbers from the event that should comfortably outpace the overall consumption growth momentum,” Dutch-based bank ING said in a note on 7 November.

Focus article by Jonathan Yee