Singapore companies most pessimistic in Asia about business outlook: Survey

Singapore companies had the most negative business outlook among their Asian counterparts.
Singapore companies had the most negative business outlook among their Asian counterparts.PHOTO: ST FILE

SINGAPORE (REUTERS) - Singapore companies had the most negative business outlook among their Asian counterparts in the third quarter, with sentiment plunging the most, a Thomson Reuters/Insead survey found.

While sentiment at Asian companies overall in July-September edged up in the survey index to 68 - its highest level in five quarters - Singapore saw the sharpest fall in outlook in Asia, with a 25-point plunge to 38.

Singapore's exports in August stagnated, adding to concerns for the city-state which has been hurt by the tumble in oil prices and last month cut its economic growth forecast. Companies cited rising corporate debt in China and energy prices as key risks.

The sentiment among other Asian companies were boosted by signs that China's economy is stabilising and as concerns about Britain's move to exit the European Union recede, the survey showed.

But businesses cited the policy uncertainty from a potential victory for US Republican presidential candidate Donald Trump, as well as energy prices as key risks.

The Thomson Reuters/Insead Asian Business Sentiment Index, representing the six-month outlook at 118 firms, was 68 in the third quarter against 67 three months prior - marking the third consecutive quarterly gain from a four-year low in December. A reading over 50 indicates a positive view.

"The risks in China look more manageable. Brexit has not yet resulted into a full-blown crisis so there is a hope that it will be contained," said Antonio Fatas, a Singapore-based economics professor at Insead.

The index started in 2009 with an all-time low of 45, but has largely hovered between 60 and 70 in the years since then.

China, the world's second-biggest economy, had a subindex of 90, its highest since the first quarter of 2011. Four of five respondents in China rated their six-month business outlook as positive, while one was neutral.

China's factory output and retail sales grew faster than expected in August, buoyed by a strong housing market and a government infrastructure spending spree, suggesting the country's third-quarter growth is holding up better than expected.

Australia, a major supplier of resources to China, saw this quarter's biggest gain in sentiment, with a 19-point jump in its subindex to 88, as the economy expanded at its fastest annual pace in four years in the second quarter.

Companies in the Philippines were the most optimistic for a fifth straight quarter, with a subindex of 94, due to strong economic growth in the South-east Asian nation.

South Korea and Japan posted a neutral index of 50 each, with business sentiment dropping from 73 in the case of Korea and climbing from 46 for Japan.

A Trump US presidency and energy prices were most often cited as the biggest business risks for the firms, with 15 of 114 responses each, followed by China's rising corporate debt at 14.

"Yes, Trump represents a risk," said Insead's Fatas, adding these included geopolitical risk and a lack of concrete economic proposals.

Other risks cited by the survey respondents included sluggish consumer sentiment with eight mentions, while seven firms cited foreign exchange volatility.

The latest poll, conducted Sept 1 through Sept 17, showed 49 per cent of respondents had a positive outlook - the highest in nearly two years. Thirty eight per cent were neutral while 13 per cent were negative.

By sector, sentiment rose the most in the real estate sector, with a subindex climbing 12 points to 75, making it among the top performers.

The biggest decliner was the retail and leisure sector, with its reading falling 14 points to 68.

The construction & engineering sector remained the most downbeat, with a reading of 58. But the mood was bright in South Korea, where construction began on a record 720,000 new residential units last year.

"We expect construction materials to boom until next year as the construction market has been experiencing a strong demand last year and this year," KCC, a leading South Korean construction materials maker, said in an e-mailed statement.

A record 17 Singapore companies participated in the survey.

Respondents who agreed to be identified included Oil Search, Hero MotoCorp, Hitachi, Kossan Rubber, Philippine National Bank and Advanced Semiconductor Engineering.