UPDATE: Oil falls by $1/bbl, Asia petrochemical shares tumble on global growth worries

SINGAPORE (ICIS)–Asian petrochemical shares slumped on Wednesday as regional bourses tracked Wall Street’s rout overnight on poor data from both the US and China, with crude prices shedding more than $1/bbl in late Asian trade.

• Major US equity indexes suffer worst session since 5 August
• China August export orders decline for first time in eight months
• US crude trades below $70/bbl

At the close of trade in Tokyo, Mitsui Chemicals fell 3.07% and Sumitomo Chemical tumbled by more than 4%, with the Nikkei 225 index down 4.24% at 37,047.61.

It was the second sharpest decline in Japan’s benchmark stock index since the 12% plunge on 5 August due to US recession fears and a stronger yen.

In Seoul, LG Chem ended down 2.06%, with South Korea’s KOSPI Index down 3.15% to close at 2,580.80.

In Hong Kong, PetroChina slumped by more than 6% at the close of trade, with the Hang Seng Index down by 1.10% at 17,457.34.

In Kuala Lumpur, PETRONAS Chemicals Group (PCG) slipped by 0.36% with the stock market index dipping by 0.43% to close 1,670.88.

Major US equity indexes overnight posted their worst session since the global sell-off on 5 August this year, as financial markets evaluated economic data from the US and China.

The Dow Jones Industrial Average tumbled overnight by 1.51%, the S&P 500 fell by 2.12%, and the Nasdaq Composite closed 3.26% lower.

US, CHINA DATA STOKE SLOWDOWN WORRIES 
In the US, the Institute for Supply Management (ISM) monthly survey of purchasing managers showed a reading of 47.2, below the 50 breakeven point for expansion of activity for the fifth straight month.

Separately, the final S&P Global US manufacturing PMI reading for August was at 47.9, down from 49.6 in July. The latest reading was the lowest since last December and signaled a second consecutive month of deteriorating manufacturing conditions.

Meanwhile, China released economic data on 31 August indicating a decline in export orders, the first such decrease in eight months.

China’s factories remained in contraction mode, with August official manufacturing PMI posting a reading of below 50 for the fourth consecutive month.

Additionally, data on 1 September showed that China’s new home prices increased at their slowest pace of the year during August.

The average price for new homes across 100 cities in the country edged up 0.11% from July, slowing from the 0.13% rise in June this year, according to data from property researcher China Index Academy.

OIL PRICES CONTINUE LOWER

Oil prices fell by more than $1/bbl in late Asian trade on Wednesday, extending their losses after plunging by more than 4% the previous day and hovering at their lowest since December 2023 on concerns about sluggish global demand.

Also exerting downward pressure on the market are expectations that a political dispute halting Libyan exports could be resolved.

Libya’s move to appoint a new central bank governor signals progress in resolving recent challenges, but this development, coupled with the resumption of Libyan oil production and OPEC+’s planned output increase, could lead to an oversupply of oil, putting downward pressure on crude prices.

“The market is also bracing itself for the gradual return of OPEC+ [OPEC and its allies] supply from October, at a time when there is plenty of concern over demand weakness,” Dutch banking and financial information services provider ING said in a note.

“The further pressure we see on prices the more likely that OPEC+ will be forced to scrap plans to bring supply back onto the market,” it said.

“However, with the balance looking soft through 2025, the question is when the group will eventually be able to bring supply back onto the market without putting significant pressure on prices,” ING added.

Focus article by Nurluqman Suratman

(Updates stocks, oil prices; adds ING comments)

Thumbnail image: At Yantai Port in China on 2 September 2024. (Source: Costfoto/NurPhoto/Shutterstock)