Saudi market outlook: As product prices sink, target prices of petchem stocks slashed | ZAWYA MENA Edition:
Petrochemical prices are set to decline within a range of 15-20 percent in 2020 and no material recovery is seen until 2022, said Al Rajhi Capital in a note on the sector.
“While supply side pressures had been leading the decline in petchem prices in the past many quarters, now demand pressures due to the current pandemic have even more widened the gap,” said Pritish Devassy, head of equity research, at the investment bank said.
On the positive side, given their low-cost structures, Saudi petchems would be best positioned in the case of a recovery because of operating leverage relative to global chemical firms as well as other local sectors.
“Initially, exposure to China/ Asia Pacific was considered as key negative for petchems but given current state we expect China could lead the recovery and subsequently exposure to these nations could lead the early stages of growth in the recovery.”
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