China **Chemical market

The world’s third largest economy, China will probably need more than yuan (CNY)4,000bn ($585bn) to achieve its “ambitious” target of growing at an 8% pace this year while the rest of the world is in recession. Achieveing 5-6% GDP growth might realistic. Standard and Chartered Bank was quoted in the media as projecting that China may double the current fiscal stimulus package through to 2010. Doing deals in China is interesting and a realistic valuation is difficult. What would be the realist expectation from the seller in current economic environment.

Anyway, for the second consecutive month, the China headline PMI data showed sequential improvement and supports the view that the slowdown in China has bottomed out and the recovery has begun with the help of the government stimulus plan. In looking at the drivers behind the data, it appears a significant improvement in the chemical industry fundamentals was one of the bigger contributors to the overall improvement with improving new orders, a growing backlog, and declining inventories. Based on a deep dive through the data, the strength in China could be viewed as a positive for chemical space.