Business sentiment in Asia perks up: Survey

An automobile factory in China. Latest government data shows improving economic conditions in China, with fixed-asset investment rising and capital outflows moderating.
An automobile factory in China. Latest government data shows improving economic conditions in China, with fixed-asset investment rising and capital outflows moderating. PHOTO: REUTERS

Poll of 97 companies shows biggest rise in confidence among firms in China, Singapore

HONG KONG • Sentiment at some of the biggest companies across Asia brightened in the first quarter this year, rising from a four-year low registered three months prior, as executives bet on economic improvement in China, a Thomson Reuters/Insead survey shows.

The survey in which 97 companies rated their six-month outlook resulted in a Thomson Reuters/ Insead Asian Business Sentiment Index of 65 for March from 58 in December last year. A reading over 50 indicates a positive view.

The companies ranked a decline in Chinese demand as the primary risk to their outlooks, followed by excessive foreign exchange volatility and falling oil prices. Yet readings across the region show the biggest rise in confidence among firms in China itself and chief trading partners such as Singapore.

"The index is not an amazingly great number but it tells us there is certainly less pessimism now than in previous surveys," said Singapore-based economics professor Antonio Fatas at global business school Insead. "People are digesting the economic slowdown in China and are being more optimistic and looking for opportunities rather than being alarmist, and that shows up in the numbers around the region, particularly Singapore."

The South-east Asian state registered the quarter's steepest rise in sentiment at 29 points, resulting in a neutral sub-index at 50 after two deeply pessimistic quarters. In its top trading partner China, sentiment rose 21 points to 71.

Latest government data shows improving economic conditions in China, with fixed-asset investment rising and capital outflows moderating, top officials said. The government also said it is aiming for economic growth of as much as 7 per cent this year, after 6.9 per cent in 2015 - the slowest rate in 25 years.

China's outlook is crucial in a region where every economy counts the country among its top three trading partners. But while economic improvement helped overall sentiment rebound, sub-indexes were still below the 50 mark in Malaysia, Taiwan and Indonesia.

Sentiment fell the most in Indonesia, by 23 points to 42, in a quarter which saw the central bank of South-east Asia's biggest economy lowering interest rates three times to stimulate growth.

Stimulus measures by central banks elsewhere, from Japan to Europe, encouraged investment in the more risky assets during the survey's polling. But, on the whole, corporate executives remained wary about the broader health of the global economy.

"I think it is still too soon to say the world economy has turned a corner as the United States is still not raising interest rates despite an ongoing recovery - which tells me how fragile sentiment is," said Mr Edward Yip, corporate affairs general manager at Malaysian survey respondent Kossan Rubber Industries, which makes medical gloves. "We need to see two sustained quarters of rebound before drawing that conclusion."

Companies in the Philippines were the most optimistic in the third consecutive survey, with that sub-index rising to 85 from 77 three months earlier.

Thomson Reuters and Insead polled companies from March 7- 19. Of 97 respondents, 41 per cent rated their six-month outlook as positive, 48 per cent were neutral and 11 per cent were negative.

REUTERS

A version of this article appeared in the print edition of The Straits Times on March 24, 2016, with the headline 'Business sentiment in Asia perks up: Survey'. Print Edition | Subscribe