EM Chemicals: A disruption-fuelled rally
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HSBC observes that emerging market chemical stocks have surged approximately 16% since the onset of Middle East conflicts, sharply outperforming a 13% decline in the broader EM index. The Platts chemical index has rocketed roughly 60% since early March. This rally is driven by supply shocks and capital rotation into the sector, propelled by soaring petrochemical benchmark prices.
The firm's updated supply-and-demand model assumes Middle East capacity losses persist through April and Asian production remains constrained by feedstock shortages until the end of the second quarter of 2026. Global operating rates are projected to peak near 110% during March and April due to significant inventory drawdowns, before normalizing to the low-80% range in the second half. Consequently, this represents a one-time profit boost lasting only one to two quarters, with margins expected to revert to cyclical lows by year-end.
HSBC adjusted target prices across several companies while maintaining existing ratings. The 2026 oil price assumption was revised higher to USD 80 per barrel. Buy-rated stocks include Alujain, Braskem, Orbia, and Rabigh. Key risks involve a prolonged conflict, which could ultimately trigger demand destruction and yield a net negative impact on the sector.