From Medical Tourism to Casinos, Oil Shock Hits Southeast Asia

Motorists queue to fill up fuel at a gas station in Ho Chi Minh City. Photographer: Thanh Hue/Getty Images Photo by Thanh Hue /Getty Images

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(Bloomberg) — A growing list of companies in Southeast Asia are sounding the warning bell over rising energy costs and weakening consumer demand as the conflict in the Middle East drags into its third month.

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Earnings downgrades have been steepest in the Philippines and Thailand, according to Bloomberg Intelligence analyst Sufianti. Inflation surged to a three-year high in the Philippines, which imports nearly all of its fuel from the Middle East, while Thailand’s economy relies heavily on tourism. 

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Indonesia and Malaysia have fared better, backed by stronger commodity prices that have helped offset rising energy costs. Companies in Singapore and Vietnam, meanwhile, are faced with rising logistical costs as supply routes are disrupted.

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Here’s a roundup, based on statements made around earnings, of how Southeast Asian companies are responding.

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Aviation and Tourism

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The aviation industry is among the hardest hit as more expensive tickets disrupt travel demand. 

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AirAsia X Bhd., Singapore Airlines Ltd. and Thai Airways International Pcl have all responded to rising jet fuel costs with fare hikes, fuel surcharges, route cuts and tighter spending controls, while Vietnam Airlines JSC said it activated contingency plans to continue to operate amid the disruption.

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Airports of Thailand Pcl said higher ticket prices and cancellations have started to hurt traffic, prompting the state-controlled airport operator to offer incentives and discounts. 

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Consumer, Food and Retail

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Rising fuel and freight costs have eroded household purchasing power. Fried chicken chain Jollibee Foods Corp. reported a 39% profit drop due to higher commodity and supply-chain expenses, prompting a review of its expansion plans. Charoen Pokphand Foods Pcl of Thailand warned that transport and raw material prices could continue climbing as freight disruptions affect animal feed supplies.

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Casino operator Genting Singapore Ltd. flagged softer travel demand and weaker consumer sentiment as airfares and living costs rise, while Globe Telecom Inc. expects household budgets to be pressured by rising costs.

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Energy and Petrochemicals

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Industrial and petrochemical companies are grappling with supply disruptions as tensions around the Strait of Hormuz threaten the flow of key raw materials. 

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Thai energy giant PTT Pcl warned of higher financing and procurement costs tied to crude purchases. It has secured additional oil supplies from outside conflict zones. Siam Cement Pcl suspended part of its chemicals operations because of feedstock shortages.

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Companies in the sector are seeking alternative suppliers and building inventories as shipping disruptions continue to ripple through supply chains.

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Health and Financial Services

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Health care and financial firms have now started to feel the crisis’ secondary effects. Bangkok Dusit Medical Services Pcl said travel disruptions have cut the number of Middle Eastern patients seeking treatment in Thailand, and warned higher living costs could lead consumers to delay non-essential procedures.