The fallout of Vladimir Putin's invasion of Ukraine continues to seep into other countries.
Oil price increases in India are “far and away the most-severe impact in Asia, where most nations import oil, and will see their economies suffer,” Real Money Columnist Alex Frew McMillan noted recently.
Now the key Sensex index of Indian shares is closely tied to oil prices, for a straightforward reason.
“India is the world's third-largest oil importer, behind China and the United States, shipping 86% of the oil that it needs,” McMillan noted. “Every 10% increase in the cost of oil hurts the Indian economy to the tune of -0.20 basis points, Nomura economists Sonal Varma and Aurodeep Nandi calculate.”
In addition, “a 10% hike in the oil price also causes a 0.40 percentage point increase in Indian inflation,” McMillan said. “That’s level with the Philippines, another major importer of both energy and food, for the biggest impact in Asia.”
The effects are also intense for Hong Kong, which now faces the additional drag from a Covid crisis that is quickly growing out of control.
“Hong Kong stocks have historically dropped sharply in reaction to military conflicts such as the Gulf War, the Iraq war, and Russia's annexation of the Crimea,” McMillan noted. “But, CCB International's analysts note, the Hang Seng has rebounded between 3% and 11% in the following quarter after the onset of fighting.”
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