By Peter Starck
FRANKFURT (Reuters) - Chemicals stocks remain attractive from an investment viewpoint, and shares in companies making fertilizers and pesticides will offer good value for a long time to come, German fund managers and analysts say.
"I am overweight chemicals, and I will stick with it," said Tim Albrecht, Senior Fund Manager Equities at Germany's leading mutual funds group DWS, part of Deutsche Bank.
"The overall global economy is robust, and there's quite good demand from many end-markets," Albrecht said in advance of the Reuters Chemicals Summit in Frankfurt.
"There are people who say that slower demand from end-markets will cause difficulties, but we have been told by management of chemical companies that the market is not understanding that the downturn won't be so hard this time because demand is now more balanced across regions," he said.
Industry analysts disagree on when the strong chemicals business cycle will end, after European sector stocks have outperformed the broader market over the past three years.
"Consumers may start destocking in mid-2007," said Christian Schlimm, a buy-side chemicals analyst at Allianz Dresdner Global Investors, the mutual funds arm of insurer Allianz, pointing to growing supply of many commodity chemicals.
"A lot of products have moved from short to neutral, I would not say long yet, because of new capacity," he said, adding this had taken away some of the producers' pricing momentum.
"This could mean challenges for some companies; they might see margin contraction," Albrecht said. Continued...
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