Energy Chemistry ETF That Can't Keep Up

[Asia Economy Reporter Junho Hwang] Energy chemical exchange-traded funds (ETFs) have recorded negative returns this month. The stock prices of the components of the index have fallen due to the decline in chemical product prices, resulting in a weak market.

According to the Korea Exchange on the 11th, the KBSTAR 200 Energy Chemical and TIGER 200 Energy Chemical ETFs recorded returns of -7.51% and -7.26%, respectively, marking the lowest returns among all ETFs this month.

The KOSPI 200 Energy Chemical index, which these two products track, has been on a downward trend throughout the month except for the 2nd. This index includes leading domestic energy chemical sectors listed on the Korea Stock Exchange, such as LG Chem, SK Innovation, SK, SK IE Technology, S-Oil, and Lotte Chemical. These stocks have been falling one after another this month. LG Chem dropped from 832,000 KRW at the beginning of the month to 739,000 KRW on the 10th closing price (-12.58%), SK Innovation fell from 239,500 KRW to 224,500 KRW (-6.68%), and SK declined from 243,000 KRW to 235,500 KRW (-3.18%).

As petrochemical product prices decline, stock prices are also struggling. Researcher Kyuwon Hwang of Yuanta Securities said, "The prices of Chinese petrochemical products, which surged last month due to power shortages and logistics issues in China, have fallen even more compared to mid-September before the rebound," adding, "With the inflow of U.S. and European products scheduled until next month, the weakness in petrochemical products is expected to continue for the time being."

However, in the refining industry, a full-scale demand recovery is anticipated. Researcher Yujin Jeon of Hi Investment & Securities stated, "Gasoline demand has recovered to pre-pandemic levels, and jet fuel and diesel are expected to join this recovery," adding, "Southeast Asian countries with a high manufacturing ratio are currently in a phase where industrial activities are clearly normalizing due to expanded vaccination by the end of the year, so diesel demand, mainly used as industrial fuel, is expected to recover to pre-2019 levels."