Impact of financial and energy market uncertainties on ASEAN-5 markets

Abstract

This study investigates the interdependence between global uncertainty indices and ASEAN-5 equity markets. Utilizing the CBOE Volatility Index (VIX) and the CBOE Oil Volatility Index (OVX) as proxies for global financial market and oil market uncertainty, respectively, we examine their connectedness with five major Southeast Asian stock markets (Malaysia, Indonesia, Singapore, Thailand, and the Philippines). A time-varying copula framework is employed to model non-linear dependencies and extreme tail co-movements, and we complement this with risk metrics (Value-at-Risk and CoVaR) to quantify downside risk spillovers. Our findings reveal that ASEAN-5 markets are highly susceptible to spikes in global volatility, especially during crisis periods. Singapore and Thailand show notably greater sensitivity to oil-market volatility shocks, while Malaysia and the Philippines react more strongly to global financial uncertainty. We also uncover asymmetric tail dependence: negative shocks to global volatility indices exert a more pronounced contagion effect on ASEAN-5 markets than positive shocks of equivalent magnitude. The ΔCoVaR analysis further highlights that systemic risk in ASEAN-5 is amplified under heightened global uncertainty, underscoring the need for vigilant monitoring of uncertainty transmission. These results significantly impact policymakers and investors in designing tailored risk management strategies to mitigate regional contagion.