Hormuz energy shock rattles economies across ASEAN markets
Supply disruption fears in the Strait of Hormuz have erased billions from ASEAN markets, exposing low oil reserves and deeper risks to tourism and petrochemicals.
- The closure of the Strait of Hormuz has caused the market capitalisation of companies across the ASEAN region to shrink by over US$216.9 billion since late February.
- ASEAN nations are particularly vulnerable to the energy shock due to low oil reserves, which are significantly lower than those of other Asian countries like Japan and South Korea.
- Key industries such as petrochemicals and tourism have been severely impacted, with major companies in Indonesia and Thailand seeing market value drops of up to 27%.
- Indonesia has been the hardest-hit country, losing US$115.5 billion in market value, followed by Thailand with a US$48.9 billion loss.
Since the outbreak of the Iran war in late February, the market capitalisation of companies across the ASEAN region has shrunk by at least US$216.9 billion (about 7.1 trillion baht), with the closure of the Strait of Hormuz emerging as a major factor.
Nikkei Asia reported that the combined market capitalisation of some 3,500 non-financial companies in Indonesia, Thailand, Malaysia, Singapore, the Philippines and Vietnam stood at US$1.92 trillion as of March 26, down 10.2% from February 27, the day before the United States and Israel began attacking Iran, based on QUICK FactSet data converted into US dollars.
Southeast Asia has felt the impact of tensions in the Middle East sooner than other parts of Asia because its low oil reserves have left key industries such as petrochemicals and tourism vulnerable.
Indonesia has been hit hardest, with US$115.5 billion wiped off market value, followed by Thailand with US$48.9 billion.
The Philippines and Vietnam each lost more than US$16 billion.
Major stock indices in the region have also fallen sharply.
As of March 26, Vietnam’s VN Index and Indonesia’s Jakarta Composite Index were down 13%, while Japan’s Nikkei Stock Average had fallen 9% and the United States’ S&P 500 was down 6%.
Government data and local media reports also showed that, by the end of March, oil reserves across the region were at low levels.
Indonesia had reserves for only about 30 days, the Philippines about 45 days, Vietnam and Malaysia about 50 days each, while Thailand had the highest level in the region at 103 days.
Even so, those figures remained below Japan and South Korea, which both had reserves of more than 200 days.
Shuhei Hashimoto, a Southeast Asia economic expert at Roland Berger, said: “Compared with other regions, ASEAN has less capacity to absorb the shock of oil shortages, and the impact is more likely to spread to businesses and households.”
The petrochemical sector has been among the hardest hit.
Chandra Asri Pacific, Indonesia’s largest petrochemical company, saw its market value plunge 27% to US$25.2 billion.
In Thailand, PTT fell 12% to US$30 billion, while The Siam Cement Public Company Limited dropped 18% to US$7.1 billion, as they faced difficulties securing naphtha and ethylene.
Tourism has also been hit hard.
Vietnam Airlines saw its market value fall 21% to US$2.6 billion and is preparing to reduce domestic flights from April.
Airports of Thailand Public Company Limited also fell more than 10% to US$22 billion.
The Thai government estimates that if the Middle East situation drags on, the number of foreign tourist arrivals could fall by as much as 25% from the original forecast.
Nikkei
