Middle East petrochemical companies will see another quarter of strong earnings growth, due to the continued rise in chemical prices combined with increased plant utilisations, Nomura said.

The brokerage in its forecast stated that profitability in the second quarter may be the highest for the sector in the last decade.

Nomura, which remained positive on Middle East petrochemicals companies, upgraded Saudi Kayan Petrochemical Company to 'buy' from 'reduce,' and raised its price targets on several other petrochemical companies.

Petrochemical companies in the Middle East have the financial flexibility to pursue asset growth and dividend raise, due to high chemical prices, low-cost feedstock and plant expansion over the last decade, Nomura said.

'We see the sector being able to use its hydrocarbon resource advantage to cherry pick optimal projects - domestically or acquisitions outside the region - to maximise plant economics, thereby sustaining returns in the long term,' it wrote in a note to clients.

The brokerage, however, downgraded Sidi Kerir Petrochemicals Co and National Petrochemicals Co (PetroChem)  to 'reduce' from 'neutral,' and cut its rating on Dana Gas Company to 'neutral' from 'buy'.

Nomura expects the industry's share price performance to catch up as valuations have not yet fully priced in a period of peak cycle margins likely in the coming years.

'We would see any lull in share price performance over the low liquidity period during the Middle East summer, together with a pullback in commodities, as a good buying opportunity for long-term holdings', the brokerage added.-Reuters