Arab News reported that the Saudi petrochemical sector clearly faces potentially growing challenges as the global demand outlook darkens, a Kingdom based analyst warned as Saudi Basic Industries Corporation posted 35% decline in Q2 profit.

The Saudi stock market's petrochemical industries index showed an upward trend however, rising by 0.88%. The Tadawul All Share Index also rose by 0.6% to 6,628.26 points.

SABIC said that the continuous slowdown in global economic growth was a major reason for the earnings decline. Its net income fell to SAR 5.3 billion from SAR 8.1 billion Year earlier

Mr Jarmo T Kotilaine chief economist at the National Commercial Bank said that "Particularly important in this regard is the relative loss of growth momentum in some of the leading emerging markets led by China. The effects of these trends have been amplified by the recent downward pressures on the oil price. In general terms petrochemicals tend to be among more vulnerable key sectors to external conditions. It is still early to tell to what extent this constitutes a trend.

The analyst said that "There is a chance that the current pricing now reflects excessive optimism. Provided serious disruptions can be avoided for now and especially if there is an effort to counteract such risks through more unconventional easing, the underlying tightness of the oil market could yet give way to renewed market stability or even some upward pressure during the remainder of the year."

Mr Basil Al Ghalayini CEO of BMG Financial Group said that "Although SABIC enjoys a competitive edge since much of its feedstock comes from subsidized natural gas supplied by the government, SABIC got hit with profits fallen in the first half of the year due to global economic slowdown, especially in China."

Source -Arab News

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