KUALA LUMPUR (Jan 18): The plunge in crude oil prices will not lead to a swift bounce in Asian demand, according to HSBC Global Research co-head of Asia Economics Research Frederic Neumann.

In a note today, Neumann said that for one, lower commodity prices, including oil, partly reflect weakening demand itself.

In addition, he said the downturn in mining capex and the declining income of commodity producers are weighing on exports from Asia.

"Second, there's an income shift under way that's hurting Asia, at least in the short term.

"The drilling and mining boom that higher commodity prices encouraged helped boost demand for some Asian exports," he said.

Neumann said Korea and Singapore were good examples, explaining that their offshore engineering industries have taken a hit through lower orders.

He said that, more importantly, commodity exporters throughout the world spent their windfall gains freely in recent years, including on Asian goods.

"As they are now cutting back, crude importers such as advanced economies are not stepping up to make up the difference, preferring to, well, save their savings, rather than splurge, leaving the world short of demand (only witness disappointing retail sales in the US last month, reflected in a rising household saving rate).

"Of course, this is a broader commodity story, and doesn't apply just to oil, but the latter plays a major part in this," he said.

Neumann said none of this was to say that lower oil prices do not help at the margin.

"Only imagine where growth across the region would be right now, if crude was still above US$100 per barrel (say, because of a supply shock).

"A lot lower, presumably. Yet this raises a worrying prospect: if underlying growth is even weaker than currently reported, we might see activity sag further, once the cushion from the fall in oil prices fades," he said.

Neumann said true, falling energy prices raise the income of importers, and even permanently so, if they stay low.

He also said they do not add anything in themselves to growth over time, after the initial boost wears off.

"Our broader point is this: tumbling crude prices are not going to be a quick fix for Asia's growth malaise — rather, they are part of the symptom.

"A bounce in Asian demand thus appears unlikely on the account of oil. Looks like we'll be stuck in a slow grind for a while," he concluded.