Chemical Market's September Performance Fails to Meet Forecasts, Focus Shifts to October

September proved a turbulent month for global chemical markets, caught between robust expectations and a more subdued reality, with the US Federal Reserve's interest rate decision and China's 'counter-involution' policies forming the core narrative.

The month was marked by a clear watershed on 18 September, when the Federal Reserve implemented a widely anticipated 25-basis-point interest rate cut. This move effectively dashed market hopes for immediate, offsetting policy stimulus from China, causing earlier optimism to retreat as sentiment aligned with weaker fundamental conditions.

Market performance reflected this shift. The first half of September saw upward trends across various chemical product futures, largely driven by strength in black commodity markets. This activity, interpreted as part of China's efforts to tackle 'disorderly competition', sustained robust trading.

However, the latter half of the month witnessed a downturn. Following the Fed's decision, the market found little sustained support from subsequent policy news. A minor, short-lived rebound occurred on 24 September, spurred by a meeting convened by China's Ministry of Industry and Information Technology regarding the glass industry. The market perceived this as another "counter-involution" measure, leading to a brief surge in speculative sentiment. Yet, this rally proved limited, lasting only two days before fading.

Throughout September, chemical markets and international crude oil followed divergent paths. Crude oil prices traded within a range, oscillating from above $65 at the start of the month to just above $61 by 5 September, before recovering and ending the period back above $65.

In contrast, the chemical industry index started strong, maintaining an upward trajectory above 4850 points and hitting a monthly peak of 4902 on 10 September. After a period of consolidation, the index accelerated its decline from 18 September, falling to around 4788 by 23 September. A minor rebound followed, but the index ultimately closed below 4800 by the month's end.

October Outlook: Monetary Easing and Geopolitical Risks

Looking ahead, the trading theme for October is expected to centre on monetary easing and rising geopolitical risks. Analysts suggest focusing on high-volatility opportunities in undervalued chemical products.

Key data, particularly the US non-farm payroll report for September due on 3 October, will be crucial. This release is seen as a vital indicator for the health of the US economy following the restart of rate cuts and will influence the expected path of the Fed's future monetary policy.

Attention within China remains focused on the implementation and effectiveness of marginal support policies and 'counter-involution' measures. With weakening external demand and potential reductions in domestic fiscal spending, market observers are awaiting new policy directions to counter subdued economic realities.

Overall, while Sino-American strategic competition shows some signs of moderation, the market trajectory will likely hinge on the strength of the US economic recovery and the persistence of monetary easing. These factors could provide a foundation for commodities and risk assets. However, as geopolitical risks continue to spill over, potentially increasing volatility in energy products, the chemical market is poised for a potentially volatile period.