Volatility in the Eurozone - do Singaporean investors have to worry about it spilling over into the Asian markets?

Russia’s invasion of Ukraine has greatly affected inflation in the Eurozone. With the headline at 5.8% YoY instead of the expected 5.3%, Christopher Dembik, Head of Macro Analysis at Saxo, predicts that inflation will most probably jump above 6% in March with the continuing conflict in Ukraine.

The cost of energy increased from 28.6% YoY in January to 31.7% in February and will continue to do so while the hostility in Ukraine continues. Another contributing factor is the goods inflation which is currently 3% year-on-year.

Leading APAC economists have shared the following views. 

APAC CIO and Global Head of Emerging Equities, Sean Taylor, explained that the situation between Ukraine and Russia affects the European economies but the Asian economies too. The energy needs of those located near Russia are greatly affected as they’re highly reliant on it. 

On the other hand, the countries in Asia import this energy, and an increase in energy costs also impacts them. The Asian equities could also be adversely impacted if the risk premium assets in Asia increase. This could result in investors choosing USD as a more reliable option but detrimental to Asian FX.

Alicia Garcia Herrero, currently the Chief Economist of Asia Pacific at Natixis Corporate & Investment Banking, believes that the invasion of Ukraine has caught the world economy off guard. The Ukraine-Russian conflict can further aggravate inflation with energy prices above $100. In addition, Importers of gas and oil, especially from the EU, could lose their confidence, leading to a decline in investors. 

For Asia, China is a huge concern. They remain neutral regarding the invasion of Ukraine, but this could unite certain Asian countries such as Japan, South Korea, India, and those in Central Asia with the US.

China does, however, run the risk of losing investors if they side with Russia, which is not an ideal situation. Opinions on where Xi Jinping’s actual interests are vested are hugely divided. Today, the Washington Post’s opinion is that China is Russia’s ‘co-conspirator’, while Bloomberg yesterday was optimistic that China is indeed reaching out to EU leaders in a bid for neutrality. It’s fair to say that no one knows for sure.

Another economist believes that higher energy costs could impact the inflationary rate resulting in a more significant effect on the Asia Pacific. Dwyfor Evans, Head of APAC Macro Strategy at State Street Global Markets, explained that certain Asian economies could be susceptible to the external pricing of food and fuel.

According to the Group Chief Investment Officer, the conflict between Ukraine and Russia affects Europe much more than is realised. The natural gas provided by Russia is something many rely on to produce electricity and can ultimately affect companies’ costs and the consumers’ ability to purchase it easily.

The Finance Minister of Singapore, Lawrence Wong, is quite hopeful and monitoring any external risks that may influence their country’s inflation and growth. There are plans to enhance energy supply resilience and address the effects inflation will have on businesses and households.

Although there aren’t significant ties between Singapore and Russia or Ukraine, he isn’t oblivious that this invasion will have an international effect on the economy and the energy markets. He’s committed to protecting jobs and assisting with increases in costs. Mr. Wong is also optimistic that Singapore can face the challenges head-on and is confident that its prospects are promising even though the future is uncertain. 

As raised by MP Seah Kian Peng from the People’s Action Party, there is a concern that Singapore does receive a considerable amount of sunflower seeds and oil from Ukraine. This is used in feeding livestock and producing eggs and can add some financial pressure to businesses.


The data shared by ING - Economic and Financial Analysis, indicate that Singapore and Taiwan currently have an overall trade of less than 1% nominal GDP with Russia and Ukraine. When it comes to energy dependence, Singapore isn’t less dependent.

Regarding the weight of food and energy in the CPI basket, Singapore has much less weight than other Asian countries. The loss of household purchasing power will not be as significant for Singaporeans as for underdeveloped economies.

Looking at the relative rankings table and which countries’ economies are most likely to be affected by the channels above, Singapore ranks among the least affected. 


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