Belle Chang
Oil prices have long been one critical driver for macro and equity performance. Amid a volatile oil prices backdrop, we think it is crucial for investors to understand the correlation between oil prices and APAC equity markets.
- Among APAC equity markets, Australia has a higher beta to oil prices while India, Indonesia and Thailand have lower betas. Domestic political uncertainties have been one main reason for the decoupling trend seen in Indonesia and Thailand.
- Over the past three years, beta has dropped across most APAC markets. The fading correlation can be largely attributed to the explosive AI-led equity rally, which doesn’t necessarily have a strong correlation with strong economic growth and demand. Geopolitical and domestic political developments play an important role too. China is the only market that saw an increase in the beta to oil prices over the last three years.
- Breaking beta down by industry, industries with the highest positive betas to oil prices are predominantly in the Energy and Basic Materials industries. Consumer Staples, Consumer Discretionary and Utilities typically exhibit negative betas to oil prices. However, Australia Utilities stands out with consistently positive betas.
Oil prices have long been a key macro driver for global financial markets, and can have a stronger impact on particular equity markets. Recent geopolitical tensions had pushed Brent oil prices temporarily above $80/bbl, before the tension eased. Regardless of short-term developments, understanding the correlation between oil prices and APAC equity markets remains crucial. Some markets exhibit heightened sensitivity due to their reliance on energy imports or exports, while others may show inverse relationships due to industry composition or idiosyncratic macroeconomic backdrop. In this article, we look into the betas of APAC equity markets and industries to oil price changes, and the underlying reasons behind these dynamics.
Decoupling oil and equity trends
Traditionally, oil prices tended to move in the same direction as equities in the past. This is because in general, strong economic growth would usually mean stronger demand for oil and commodities, leading to higher oil prices, while equity markets tend to perform well amid economic upcycle. However, the relationship appears to have weakened since 2024 – a trend seen not only in the US but also in the APAC markets (Exhibit 1).
Over the last three months, oil prices have exhibited a rollercoaster move. From year start, oil prices continued to fall driven partially by an expectation of slowing global economic growth, while in April, potential supply increase from OPEC+ and trade tariff uncertainties drove oil prices even lower. Since May, the de-escalation of tariffs uncertainty has sent oil prices higher again, while Middle East geopolitical shocks sent oil prices above $80 briefly.
EXHIBIT 1: BRENT OIL PRICES VS FTSE ASIA PAC
Source: FTSE Russell and LSEG. Data as of June 2025. Past performance is no guarantee of future results. Please see the end for important legal disclosures.
Beta to oil prices of APAC equity markets
Among APAC markets, Australia equity has the highest betas to oil prices (Exhibit 2). This is unsurprising as the Australian equity market has higher industry weights in Basic Materials (15.8% vs APAC 4.8% as of June 2025) and Energy (4.8% vs APAC 3.0%) compared with other APAC markets. More than half of Australia’s Energy stocks are in the Oil: Crude Producers sub-sector, while other markets, e.g. China and India, are more concentrated in the Oil Refining and Marketing and Coal sectors – which usually benefit from lower oil prices not higher.
EXHIBIT 2: 3Y ROLLING BETAS TO OIL PRICES – MAJOR APAC EQUITY MARKETS (WEEKLY OBSERVATIONS)
Source: FTSE Russell and LSEG. Data as of June 2025. Past performance is no guarantee of future results. Please see the end for important legal disclosures.
India has been one of the countries with lower betas to oil prices among APAC. One explanation is that FTSE India index tends to be a beneficiary from lower oil prices (Exhibit 3) as the country is a big oil importer. In 2024, more than 30% of its imports were crude oil and oil related products. The Energy industry accounted for 9.8% of the FTSE India index – an important industry to the overall index performance. However, in India, Energy stocks (mainly Reliance Industries) focus more on oil-to-chemicals and new energy businesses, which benefits from lower but not higher oil prices. In addition, a lower oil price could help reduce Indian corporates’ costs, boosting the profitability of businesses. Moreover, the beta turned negative during the periods of 2019-2020 and from 4Q24 to 1Q25. During 4Q24 to 1Q25, India equity experienced a bear market which was driven by expensive valuation and foreign outflows but not by weaker fundamental outlook.
EXHIBIT 3: FTSE INDIA VS BRENT OIL (USD)
Source: FTSE Russell and LSEG. Data as of June 2025. Past performance is no guarantee of future results. Please see the end for important legal disclosures.
Indonesia and Thailand also have relatively low betas, with Thailand’s beta to oil prices dipping to negative territory in Q3 2024. Both countries have experienced domestic political turmoil. Hence, despite economic growth holding up fine and inflation being healthy, investor sentiment has been impacted in both Indonesia and Thailand. The two markets have underperformed APAC over the past two years.
Most APAC markets’ current betas to oil are lower than three years ago
As Exhibit 4 and 5 show, beta has dropped across most APAC markets and other major EM markets over the last three years. The APAC equity market troughed in October 2022 while the explosive AI demand fueled further equity rally in 2023. On contrary, oil prices peaked in June 2022 after the initial shock due to the Russia-Ukraine conflicts. Supply shocks have contributed to a decoupling between growth and oil prices, while the AI-led equity rally has further led to the disconnection of growth outlook and equity trends in many markets. Geopolitical and domestic political developments also contributed to the decoupling trends in markets such as Indonesia, Philippines and Thailand.
EXHIBIT 4: 3Y BETA TO BRENT OIL – 3 YEAR CHANGE
Source: FTSE Russell and LSEG. Data as of June 2025. Past performance is no guarantee of future results. Please see the end for important legal disclosures.
That said, China is the only market that saw an increase in the beta to oil prices over the last three years. After trending lower since early 2022, China’s beta began rising significantly from February 2025 onward. This shift coincided with the end of China’s prolonged bear market from 2022 to 2024, which was largely driven by domestic factors rather than external developments — resulting in a divergence between Chinese equities and global oil price trends. Additionally, the volatility of China’s equity market rose over the past year on the back of market fluctuations in response to various policy changes or stimulus. This has also contributed to its increasing beta.
EXHIBIT 5: 3Y ROLLING BETA WITH BRENT OIL
Source: FTSE Russell and LSEG. Data as of June 2025. Past performance is no guarantee of future results. Please see the end for important legal disclosures.
Industry Betas to oil prices
We also examine and compare industry-level betas across APAC equity markets. We exclude industries with only one constituent stock or less than three years of return history. This leaves us with a total of 113 industries in the analysis.
Unsurprisingly, industries with the highest positive betas to oil prices are predominantly in the Energy and Basic Materials industries. The top three industries with the highest 3y betas are Japan Energy, Australia Energy, and Korea Energy (Exhibit 6).
Utilities typically have a negative correlation with oil prices given the industry’s traditionally defensive nature. Utilities firms rely not only on oil but also natural gas and other alternatives fuel sources, helping buffer them from direct oil price swings. Additionally, some Utilities firms have oil as an input, hence contributing to the negative relationship. However, Australia Utilities stands out with consistently higher betas – not only over the last three years but also over longer historical periods. This is largely because major Australia Utilities firms (e.g. AGL Energy and Origin Energy) are vertically integrated energy companies which are also involved in energy generation and upper stream businesses. This broader exposure to commodity markets and wholesale energy pricing makes them less defensive and more sensitive to market and oil price fluctuations compared to their regional peers.
EXHIBIT 6: TOP 20 INDUSTRIES WITH THE HIGHEST BETA
| Industry | Current | 3y ago | Rank (3y ago) |
|---|---|---|---|
| Japan Energy | 0.41 | 0.25 | 19 |
| Australia Energy | 0.4 | 0.43 | 1 |
| Korea Energy | 0.34 | 0.31 | 8 |
| Korea Technology | 0.2 | 0.15 | 52 |
| China Health Care | 0.18 | 0.1 | 92 |
| China Basic Materials | 0.18 | 0.15 | 55 |
| Australia Utilities | 0.17 | 0.28 | 12 |
| China Consumer Discretionary | 0.17 | 0.11 | 80 |
| Korea Industrials | 0.17 | 0.25 | 20 |
| China Energy | 0.16 | 0.18 | 39 |
| Australia Basic Materials | 0.16 | 0.31 | 9 |
| Indonesia Energy | 0.16 | 0.39 | 2 |
| Korea Basic Materials | 0.15 | 0.21 | 31 |
| Taiwan Health Care | 0.15 | 0.26 | 18 |
| Korea Telecommunications | 0.15 | 0.14 | 58 |
| Hong Kong Financials | 0.15 | 0.09 | 97 |
| Indonesia Basic Materials | 0.15 | 0.37 | 3 |
| India Technology | 0.14 | 0.11 | 82 |
| Thailand Energy | 0.14 | 0.35 | 5 |
| Malaysia Basic Materials | 0.13 | 0.25 | 21 |
Source: FTSE Russell and LSEG. Data as of June 2025. Past performance is no guarantee of future results. Please see the end for important legal disclosures.
In contrast, Exhibit 7 shows that Consumer Staples stocks tend to have the most negative betas. Consumers’ spending on staples is less sensitive to economic cycle. In addition, higher oil prices reduce consumers’ disposable income, but staples are essential goods that are less directly impacted by lower spending power. As for Thailand, most industries exhibit negative betas, reflecting the impact of idiosyncratic domestic factors on the broader market, which has led to a more widespread decoupling from global oil price movements.
EXHIBIT 7: 20 INDUSTRIES WITH THE MOST NEGATIVE BETA
| Industry | Current | 3y ago | Rank (3y ago) |
|---|---|---|---|
| Philippines Telecommunications | -0.03 | 0.03 | 110 |
| Hong Kong Utilities | -0.03 | 0.06 | 105 |
| Malaysia Health Care | -0.04 | 0.06 | 106 |
| Taiwan Telecommunications | -0.05 | 0.03 | 109 |
| Taiwan Consumer Staples | -0.05 | 0.11 | 87 |
| Philippines Financials | -0.05 | 0.15 | 51 |
| Japan Utilities | -0.05 | 0.01 | 111 |
| Singapore Consumer Staples | -0.06 | 0.19 | 35 |
| Taiwan Consumer Discretionary | -0.06 | 0.17 | 45 |
| India Consumer Staples | -0.06 | 0.01 | 113 |
| Philippines Consumer Staples | -0.07 | 0.13 | 69 |
| Japan Consumer Staples | -0.07 | 0.01 | 112 |
| Indonesia Consumer Staples | -0.07 | 0.16 | 50 |
| Thailand Industrials | -0.09 | 0.13 | 68 |
| Thailand Real Estate | -0.1 | 0.23 | 25 |
| Thailand Health Care | -0.11 | 0.14 | 65 |
| Thailand Telecommunications | -0.12 | 0.07 | 103 |
| Thailand Utilities | -0.13 | 0.14 | 63 |
| Thailand Consumer Staples | -0.13 | 0.13 | 67 |
| Thailand Consumer Discretionary | -0.14 | 0.2 | 33 |
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