Asia petrochemical shares fall on strong US dollar, uncertain trade policies

SINGAPORE (ICIS)–Shares of petrochemical companies in Asia extended losses on Wednesday, tracking weakness in regional bourses, amid a strong US dollar and uncertainty over trade policies of US President-elect Donald Trump which could fuel inflation.

At 04:00 GMT, LG Chem fell by 4.75% in Seoul, while Mitsui Chemicals and Asahi Kasei were down by 2.90% and 0.88%, respectively, in Tokyo.

Formosa Petrochemical Corp (FPCC) was down 1.79% in Taipei, while Sinopec Corp slipped 0.47% in Hong Kong.

Japan’s benchmark Nikkei 225 Index was down by 1.01% at 38,978.11; South Korea’s KOSPI Composite fell by 1.91% to 2,435.04; and Hong Kong’s Hang Seng Index slipped by 0.63% to 19,721.58.

Sentiment toward Asian equities has shifted to caution following Trump’s re-election on concerns that his policies will drive up inflation and prevent the US Federal Reserve from cutting interest rates further.

The broad dollar index (DXY) rose further on 12 November to its highest since November 2022, according to Singapore-based UOB Global Economics & Markets Research.

The DXY, which measures the greenback against six peers, inched up 0.05% on Thursday to 105.97.

A stronger US dollar makes imports more expensive for Asia, fueling inflation, and higher borrowing costs for the region.

Japan and China rely heavily on imports for their energy and raw material needs.

The South Korean won continued to slide against the greenback on Thursday, hovering above the psychologically important level of won (W) 1,400 at W1,406.57 to the US dollar.

The Japanese yen (Y) also touched a fresh low since 30 July on Thursday and was trading at around Y154.8 to the US dollar.

Thumbnail image: US dollar banknotes, 19 September 2024 (Costfoto/NurPhoto/Shutterstock)