Recent news from China could benefit chemical companies like BASF, Lanxess, and Covestro, which are heavily involved there and would naturally benefit from a global economic recovery. Growth in Q3 was slightly above market expectations at 4.6 percent (up from 4.5 percent). As a result of the ongoing economic weakness, the Chinese government announced an economic stimulus package at the end of September. However, they did not provide important details on the extent to which additional debt would be taken on to boost consumption. The initial excitement in the stock markets subsided thereafter.
The ongoing crisis in the real estate sector has contributed to China’s recent economic weakness. Due to uncertainties, consumers prefer to hold onto their money, which burdens consumption.
“The measures taken by the leadership address the challenges of the economy, but the stimulus is still cautious given the situation, especially to boost consumption,” said economist Max Zenglein from the Mercis China Institute in Berlin. Considering the challenges posed by the downward pull of the real estate market, the announced measures seem more stabilizing than promoting growth, according to Zenglein. Despite the announced aid, analysts doubt that Beijing will achieve its growth target of five percent this year.
The news from China could give German chemical stocks an additional boost. Previously, hopes of monetary stimulus in the Middle Kingdom, as well as the generally positive market sentiment, had given the industry’s stocks momentum. Accordingly, the chart patterns are now in a fairly good condition. Given the relatively good medium- to long-term prospects and the currently favorable valuations in historical comparison, investors can take action. Stop-loss orders should be observed at €19.50 for Lanxess and €39.00 for BASF. Covestro remains a hold position at €62 due to the upcoming acquisition by Adnoc.
Disclosure of conflicts of interest:
The CEO and majority owner of the publishing company Börsenmedien AG, Mr. Bernd Förtsch, has directly and indirectly taken positions in the financial instruments mentioned in the publication, or related derivatives, that could benefit from any resulting price developments: BASF.
With material from dpa-AFX
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