Higher oil prices may "negatively affect" Asian equity markets, especially those in China and South Korea, by lowering corporate profits and reducing current account surpluses, Credit Suisse First Boston said.
Instability in Iraq "poses a significant threat" and may increase the cost of importing oil for Asian countries by US$30 billion this year, Credit Suisse said in a note yesterday.
"A rising import bill is the last thing Asia needs," Stewart Paterson, Manish Nigam and Peggy Chan, analysts at the Hong Kong brokerage unit of Credit Suisse wrote.
Higher oil prices "can lead to a double whammy on equity markets" by reducing company profits and cutting surpluses, the report said.
Stock benchmarks in Asia have slumped on concern rising oil prices will increase import costs and curb global demand.
The Morgan Stanley Capital International Asia-Pacific Index, which tracks more than 850 stocks in the region, has slid 8.5 percent this month as the price of oil has climbed by 7.5 percent.
South Korea, Taiwan and Japan imported all their oil last year, while China procured about 43 percent if its oil from abroad, according to Credit Suisse. India and Thailand imported about 62 percent and 75 percent of their oil, respectively, it said.
Asian countries may pay as much as US$188 billion to import oil this year, an increase of 19 percent from a year ago, if oil price averages about US$35 per barrel. China and South Korea may be particularly vulnerable to rising oil prices because an increase in oil imports would "represent a significant chunk of last year's current account surplus," the analysts said.
For the year, the price of oil has jumped 31 percent. Oil in New York reached a record US$41.85 a barrel on Monday amid terrorist attacks in the Middle East and concern about US gasoline supplies.
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