Asia petrochemical shares tumble on recession fears; regional currencies weak
Nurluqman Suratman
14-Sep-2022
SINGAPORE (ICIS)–Shares of petrochemical companies in Asia continue to trade lower on Wednesday afternoon on fears of a global recession as the US Federal Reserve is widely expected to continue its aggressive interest rate hikes to tame inflation.
Regional equities markets were also tracking heavy Wall Street losses on 13 September – its worst day in more than two years – as high US August inflation fueled bets of a 75-basis point rate increase by the Fed next week.
At 07:00 GMT, Asahi Kasei was down 2.25% in Tokyo, Lotte Chemical Corp fell 1.97% and Formosa Petrochemical Corp (FPCC) was 1.09% lower in Taipei.
Japan’s benchmark Nikkei 225 was down by 2.63%, Hong Kong’s Hang Seng Index fell by 2.34% and Singapore’s STI Index was lower by 1.06%.
| Company/Stock Exchange at 07:00 GMT | % Change |
| Nikkei 225 (Japan) | -2.63% |
| Asahi Kasei | -2.25% |
| ENEOS Holdings | -0.70% |
| Mitsubishi Chemical Holdings | -1.82% |
| Mitsui Chemicals | -1.43% |
| HANG SENG INDEX | -2.34% |
| China Petroleum & Chemical Corp | -1.68% |
| PetroChina | -0.85% |
| KOSPI Composite Index | -1.41% |
| OCI Company | -1.89% |
| SK Innovation | -1.30% |
| LG Chem | 0.00% |
| Lotte Chemical | -1.97% |
| Hanwha | -0.85% |
| TSEC weighted index (Taiwan) | -1.59% |
| Formosa Petrochemical Corp | -1.81% |
| Nan Ya Plastics | -1.74% |
| Formosa Chemicals & Fibre Corp | -2.01% |
| STI Index (Singapore) | -1.06% |
| Wilmar International | -1.48% |
| FTSE Bursa Malaysia KLCI (Malaysia) | -0.84% |
| SSE Composite Index (Shanghai, China) | -1.11% |
| Jakarta Composite Index (Indonesia) | -0.83% |
| Chandra Asri Petrochemical | -3.16% |
| SET Index (Thailand) | -0.67% |
| PTT Global Chemical | -0.54% |
| Indorama Ventures | -0.60% |
| IRPC | -1.20% |
| Siam Cement | -1.69% |
| Thai Oil | 0.45% |
“Volatility in regional equity, bond and currency markets looks set to return after relative calm in the past few sessions,” Singapore-based UOB Global Economics & Markets Research said in a note.
The Fed’s aggressive interest rate hikes to combat inflation will further weaken the world’s biggest economy and, in turn, weigh heavily on export-reliant Asia.
Market players are expecting the US central bank to hike interest rates by another 75bps on 20-21 September, following similar moves in June and July.
“Expectations for a 50bps was completely squashed, while talks on an outsized 100bps hike emerged,” Malaysia-based HongLeong Bank said in a note.
US’ August consumer inflation stood at a higher-than-expected rate of 8.3%, although down from July’s 8.5%. Excluding volatile food and energy costs, the core consumer price index (CPI) in August increased by 6.3% year on year.
Tuesday’s sell-off in US stocks erased nearly all the gains in the S&P 500’s biggest four-day surge since June, shedding more than 4.3% at the close of trade; while the Nasdaq lost 5.2%; and the Dow Jones Industrial Average ended 4% in the red.
Expectations of another hefty interest rates were providing strong support to the US dollar.
A stronger US dollar raises energy and raw materials costs, exacerbating global inflationary pressures that hurt both consumers and businesses.
The US dollar index reversed course on 13 September, rallying sharply following the release of the US CPI data and the consequent sell-off on Wall Street.
The index, which tracks the US greenback against six major peers including the euro and Japanese yen, was stable at around 109.420 at 07:00 GMT on Wednesday, after surging 1.44% overnight, its largest single-day percentage gain since March 2020.
The Fed’s aggressive monetary tightening this year has significantly strengthened the US dollar, with the Japanese yen tumbling 25% against the greenback since the start of 2022, posting the biggest depreciation among selected Asian currencies to date.
The strong US dollar was also exerting pressure on oil markets on Wednesday, as it makes crude imports more expensive.
| Product (at 07:00 GMT) | Latest | Previous | Change |
| Brent November | 92.63 | 93.17 | -0.54 |
| WTI October | 86.78 | 87.31 | -0.53 |
Focus article by Nurluqman Suratman
Additional reporting by Pearl Bantillo
(updates with latest share prices, exchange rates and oil prices)
Thumbnail image: China Shandong Qingdao Port – 29 July 2022 (Source: Xinhua/Shutterstock)
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