Surging oil prices drive Hong Kong stocks to 3-month low on inflation jitters
Brent crude gains 1.3 per cent to US$82.46, while Nymex futures rise 1.1 per cent to US$75.36
The Hang Seng Index closed 2 per cent lower at 25,249.48, the lowest since December 16. The Hang Seng Tech Index lost 1 per cent. On the mainland, the CSI 300 Index slid 1.1 per cent and the Shanghai Composite Index retreated 1 per cent.
Brent oil jumped 1.3 per cent to US$82.46 a barrel and the futures contract for Nymex crude trading in New York added 1.1 per cent to US$75.36 a barrel.
With no immediate signs of an end to the US-Iran war, investors have started to factor in the consequences of a prolonged conflict in the Middle East by trimming their exposure to risk assets. Higher oil prices will weigh on stocks and other risk assets as they will fan inflation and force the US Federal Reserve to delay interest-rate cuts.
“In equity markets, rising volatility and higher oil prices should temporarily weigh on risk appetite and create near-term downside,” said Swiss private bank Lombard Odier. Global stocks fell by an average of 3 per cent during oil shocks historically, including the Iranian Revolution in 1979 and the Israel-US strikes on Iranian nuclear facilities last year.
All but 10 stocks on the 88-member Hang Seng Index fell. Alibaba Group Holding dropped 3.6 per cent to HK$129.90 and Tencent Holdings shed 0.9 per cent to HK$506. Oil producers also gave up some of their earlier gains spurred by the surge in the fuel price, with PetroChina sliding 3 per cent to HK$10.12 and CNOOC weakening 1.9 per cent to HK$27.08.