BENGALURU: Emerging Asian assets slipped on Monday, after US and Israeli strikes on Iran and Tehran’s retaliatory moves fuelled a jump in oil prices, spurring investors to safe havens such as the US dollar, gold and government bonds.
The MSCI index of emerging Asian equities fell 1.8 percent, set for its steepest drop in nearly a month. MSCI’s gauge of emerging-market currencies declined 0.7 percent, heading for its weakest session in three years.
Oil prices jumped as much as 8 percent in early trading on fears of supply disruptions through the Strait of Hormuz. A sustained spike in crude is particularly painful for Asia’s major net importers, including Thailand and the Philippines, as it widens trade deficits and rekindles inflation pressures.
The Philippine peso and Thai baht led regional losses. The peso fell 0.9 percent to 58.185 per dollar, its weakest level since February 12, while the baht dipped 1.5 percent to the lowest since February 9.
The Indonesian rupiah fell 0.6 percent to a one-week low and the Malaysian ringgit slipped 0.8 percent to a near three-week low. The Taiwan dollar dipped 0.7 percent.
The US dollar index touched a multi-week high. “If meaningful oil price increases are sustained, we think the likes of KRW, INR, and to some extent the PHP are more vulnerable, given their linkages to oil imports and also KRW’s higher beta nature (greater sensitivity to global risk moves),” said Michael Wan, MUFG currency strategist.
South Korean markets were closed on Monday for a national holiday.
Manila shares tumbled 2.8 percent, set for its worst day in three months, while Bangkok’s benchmark fell 2.6 percent, its sharpest drop since April.
Stocks in Singapore and Jakarta also lost over 2.4 percent.
Airlines and airport-linked stocks were pressured on disruption concerns, while energy names and shippers outperformed on higher crude prices and expectations of elevated freight and insurance costs.
Singapore Airlines slid as much as 7.5 percent. Qantas tumbled as much as 10.4 percent, and Hong Kong’s Cathay Pacific lost as much as 7 percent.
Indonesia’s central bank said it would remain in the market to support the rupiah.
In the Middle East, Kuwait’s stock exchange suspended trading, citing “exceptional circumstances”, while the UAE halted trading in Abu Dhabi and Dubai for two days.
Markets will focus on inflation readings from the Philippines and Thailand on Thursday, with South Korea’s February CPI due Friday. Bank Negara Malaysia’s policy decision is due Thursday, with rates expected to be held.
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