Petrotahlil -  The shares of major Asian petrochemical firms tracked the overnight Wall Street rout on Friday amid worsening fears that disruptions to global trade and business arising from the coronavirus outbreak will lead to a prolonged economic slowdown.

At 02:45 GMT, Japan’s Asahi Kasei Corp was 3.76% lower, Mitsubishi Chemical Corp fell by 1.83% and JXTG Holdings was down by 2.51%. The benchmark Nikkei 225 index slid 2.63%.

In Hong Kong, Sinopec Shanghai Petrochemical was 0.99% lower and PetroChina was down by 0.95%. The Hang Seng Index was down by 1.90%.

South Korea's LG Chem fell by 1.85%, SK Innovation was 3.85% lower and Lotte Chemical fell by 3.81% following the recent fire at its cracker in Daesan.

Taiwanese producer Formosa Petrochemical Corp was 1.92% lower while Malaysia's PETRONAS Chemicals Group was 1.24% lower.

Overnight in the US, the S&P 500 tumbled by 3.39%. The index posted its biggest weekly percentage decline since October 2008 a week earlier.

The Dow Jones Industrial Average plunged by 3.6%, marking its fifth-worst single-day point drop on record, while the Nasdaq Composite also closed down 3.1%.

Crude futures tracked the movement in stock losses on Friday, with Brent crude down 40 cents at $49.59/bbl and US WTI crude 32 cents lower at $45.58/bb, despite news that oil cartel OPEC has agreed to slash output by an extra 1.5 million barrels per day until the second quarter of 2020.

Worries over the rapid spread of the coronavirus globally continues to plague investor sentiment as markets grappled with headlines of mounting cases and death tolls around the world.

In the US, the state of California declared a state of emergency after reporting its first death.

Total confirmed cases of the coronavirus stood at 98,370 early on Friday, as new infections in the UK, France, Italy and the US continued to climb.

The Asian Development Bank on Friday said that the coronavirus "will have a significant impact on developing Asian economies through numerous channels, including sharp declines in domestic demand, lower tourism and business travel, trade and production linkages, supply disruptions, and health effects".

ADB analysis showed that losses arising from the coronavirus could range from $77bn to 347bn, or 0.1% to 0.4% of global gross domestic product (GDP).

“What has really spooked financial markets is the rapid contagion of COVID-19 outside China to 76 countries (and counting), with a handful of hotspots – South Korea, Italy and Iran,” Japan’s Nomura Research said in a report on 5 March.

“These hotspots are now experiencing the same severe simultaneous demand (public fear factor) and supply (business disruption) shocks as China in addition to the negative spillover effects from China’s contracting economy,” it said.

Economists in China are predicting zero GDP growth or a contraction - a first for this huge economy - in the first quarter on a year-on-year basis, gauging from bleak February data on both manufacturing and services sectors.

The current volatility in financial markets is likely to remain in place and could potentially last between one to two months, if not more, Fitch Solutions Country Risk and Industry Research said in a note.

However, a confluence of factors such as Chinese workers returning to work, easier global policies and spring coming in the northern hemisphere could soften the correction, until a vaccine goes into human trials, it added.

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Source : ICIS

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