Most Asian markets falter as commodity prices fuel inflation worries

Most emerging Asian markets tumbled on Tuesday on surging crude prices as the United States mulls a ban on oil imports from Russia following its invasion of Ukraine, while strength in commodity markets boosted energy exporter Indonesia’s rupiah.

Ultra-high commodity prices kept shares and currencies in several emerging Asian economies under pressure, stoking worries over inflation and slowing economic growth in countries only just emerging from a pandemic-driven slump. O/R

China’s yuan CNY=CFXS, however, touched a one-week high with investors eying Chinese assets as a potential safe harbour amid heightened market volatility over the Ukraine crisis.

Shares in Jakarta .JKSE climbed up 0.9% before falling 0.2% by 0710 GMT, while the rupiah IDR= inched up 0.1%.

Higher exposure to commodities has benefited Indonesia’s currency and even supported shares, with oil prices hitting 14-year highs, said Khoon Goh, head of Asia research at ANZ Banking Group.

“Indonesia has also seen prices for its major commodity exports such as palm oil and coal rise strongly recently, so those are going to benefit from exports and contribute to strengthening trade balance,” Goh said.

On the other hand, the region’s other major energy exporter, Malaysia, saw its stocks .KLSE ease as much as 1.9% to a near four-week low. The ringgit MYR=, which has gained about 0.6% since the conflict began last month, gave up 0.1%.

The ringgit “has been stable for a while,” said Goh, adding that the drop in the currency on Tuesday was due to the “global risk environment and a sharp sell-off in U.S. equities likely sparking off foreign vessel outflows from Asia.”

The military conflict in Ukraine has triggered sweeping sanctions on Russia that have rattled global markets, with the United States pushing allies to ban Russian oil imports, which many fear could instigate an energy war.

The energy market has been boosted by geopolitical disputes and worries over supply disruptions have lifted commodity prices, while advancing the risks of higher inflation and slower economic growth.

That risk reflected in assets across Asia on Tuesday as a sell-off from the previous session deepened.

“Higher oil prices is negative for the region as Asia is a net oil importer. It causes higher inflation and worsening in trade and current accounts for much of the region,” said Mitul Kotecha, Senior Strategist at TD Securities.

South Korea’s won KRW=KFTC eased 0.8%, the steepest decliner among regional currencies, while benchmark stock indexes in the Philippines .PSI, Taiwan .TWII and China .SSEC sank more than 2% each.

The Russian rouble RUB= came off its record low but still fell for a third straight session.

With the Russia-Ukraine conflict about to enter its third week and peace talks making little headway, the rift between safe havens and assets generally considered more risky grows larger by the day.

Yields on high-returning Indonesian benchmark bonds ID10YT=RR jumped 60 basis points to 6.773%.

Even long-tenor bonds in Singapore SG10YT=RR, seen as a safer bet in the region, saw yields climb 36 basis points to 1.842%, as concerns about inflationary pressure and slowing growth triggered outflows.

HIGHLIGHTS:
** Top gainers on the Jakarta stock index were Pool Advista Finance POLA.JK, up 29.89%, and Trinitan Metals and Minerals PURE.JK, up 20%

** Top losers on FTSE Bursa Malaysia Kl Index included Hartalega Holdings HTHB.KL and Inari Amertron INAR.KL, down 4.36% and 4.7% respectively.

Asia stock indexes and currencies at 0748 GMT

COUNTRY
FX RIC
FX DAILY %
FX YTD %
INDEX
STOCKS DAILY %
STOCKS YTD %
Japan

JPY=

-0.11
-0.29
.N225

-1.71
-13.9
China

CNY=CFXS

+0.08
+0.62
.SSEC

-2.35
-9.51
India

INR=IN

+0.07
-3.35
.NSEI

-0.92
-9.43
Indonesia

IDR=

+0.07
-1.01
.JKSE

-0.67
3.67
Malaysia

MYR=

-0.12
-0.38
.KLSE

-1.54
0.70
Philippines

PHP=

+0.00
-2.47
.PSI

-4.26
-2.03
S.Korea

KRW=KFTC

-0.80
-3.91
.KS11

-1.09
-11.93
Singapore

SGD=

-0.13
-1.05
.STI

-1.41
0.62
Taiwan

TWD=TP

-0.43
-2.46
.TWII

-2.06
-7.65
Thailand

THB=TH

-0.51
+0.72
.SETI

-2.51
-4.33
Source: Reuters (Reporting by Riya Sharma; Editing by Vinay Dwivedi)