1. Petchem cost of production depends on crude oil price. If crude oil is cheap then petchem will make more money. But If crude oil price is high and elevated then it will eat into petchem profits. So petchem will suffer margin compression due to high crude oil price now
2. Petrol chemical by products are used for tens of thousands of products. But the US - China trade war is impacting exports from China and everywhere. So demand for petchem products will drop. This is already shown up by the drastic drop of export in petchem products to Hong Kong and China from Singapore. Spore is entering recession soon.
So guys. Best is to sell petchem early for the above 2 reasons
No. 1
High cost of production due to high crude oil prices
No. 2
Huge drop in demand for petrol chemical products due to escalating trade war.
I am not a "fundamental" trader but if calvintaneng thinks that at USD56.02 crude oil price is high and PCHEM will suffer margin compression, can someone here (or anyone) explain how did PCHEM perform profitably and grow exponentially several years ago when crude oil price was USD70 to USD100?
About US - China trade war, my question is how long will Donald Trump remain as US President? Will the whole world suddenly stop consuming the tens of thousands of chemical products during this trade war?
Another thing, is it ethical for calvintaneng to advise people to sell (or cut loss) at historically low prices? If he is sincere in helping people, he should have advised them to sell PCHEM 6 months ago when the price was around RM9.30 (I did suggest people to reduce their risk exposure to PCHEM 6 months ago but nobody seem to take me seriously then).
Calvin don’t know its fundamental. What I understand is that the cost price is subsidised by Petronas. Only ASP depends on market price. So the impact on margin is not that significant compared to Lotte and other chemical player regionally. That’s why people hate Citibank coz Pchem is not only dependent on the chemicals prices. There are other factors that will support Pchem like Rapid, huge cash balances etc.
Coz they have stupid fund manager buying based on Citibank. U shd refer to previous chat about Citibank. Now kwap and epf will be buying back the shares.
Patience la to get the best price.. if u know petrochemical industry then u should know recenlty profit margin underpressure as well as over supply.. so i eatimate less than 800m profict coming QR. Other wise the share price wont drop like this.
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Keyman188
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Posted by Keyman188 > 2019-07-22 11:17 | Report Abuse
Touch back 7.80....