The Implication of Integration and Diversification on 'Oil and Gas' Industries Among ASEAN Countries

Abstract

This paper examines the investment opportunities in oil and gas industries in six selected ASEAN countries. The study employs the VAR as well as the bivariate VARMA-MGARCH-ABEKK model on 15 years’ daily time series data. The empirical results report that some investors can obtain a cross-country intra-industry diversification benefit in Malaysia, the Philippines, Singapore and Vietnam, especially for those who have the US oil and gas assets in their portfolios. Investors who are holding Asian oil and gas assets could also invest in these four countries. However, they should bear in mind that negative shocks from the Asian industries would increase return volatilities in the industries of Malaysia, Singapore and Vietnam. The industries of Indonesia and Thailand are insensitive with cross-country intra-industry diversification. This study provides new insights for investors to improve their investment portfolio while investing in oil and gas markets of ASEAN countries.

Keywords: ASEAN countries, Oil and Gas industry, Energy markets, Oil and gas integration, Portfolio selection, Investment Implications

JEL Classification: G11, G15, F36, L95, Q40