Asia business mood near 3-year low amid trade concerns: Poll

SEOUL • Confidence among Asian firms held near three-year lows in the first quarter as a US-China trade dispute dragged on, pulling down a global economy already on a downward path, a survey found.

The Thomson Reuters/Insead Asian Business Sentiment Index tracking firms' six-month outlook was flat in the March quarter from the previous quarter's 63, compared with a near three-year low of 58 set in the September quarter. A reading above 50 means optimistic respondents outnumbered pessimists, but the latest index still marks one of the five worst since the world started its recovery from the 2008-2009 global financial crisis.

"Things have not gotten worse but a lot of uncertainty is putting companies in wait-and-see mode," Singapore-based Antonio Fatas, an economics professor at global business school Insead, said of US-China talks on trade relations. "One week, it looks like they are promising and the week after, it looks like they are going nowhere, so there's a lot of wait-and-see." He said the uncertainty forces firms to put off investment decisions.

A global trade war was cited as the chief business risk by respondents for the third quarter in a row, though by a smaller margin. Higher interest rates emerged as the second-biggest risk, outpacing a slowing Chinese economy.

A total of 100 firms from a range of sectors responded to the survey conducted from March 1-15 in 11 Asia-Pacific countries, where 45 per cent of the world's population live and 32 per cent of global gross domestic product is generated.

The United States and China have put on hold a planned escalation of their trade war pending talks, but the much-awaited conclusion of the latest round has also been delayed though remarks from both sides were optimistic.

Global agencies including the International Monetary Fund and the Organisation for Economic Co-operation and Development have said failure to resolve trade tension could further slow a downward-trending global economy.

The index staying above the neutral point of 50 suggests companies in Asia are not expecting an imminent global recession, but languishing near multi-year lows indicates companies are exerting caution.

Regional powerhouses China, Japan and South Korea all saw exports fall last month, with China and South Korea suffering their worst annual declines in overseas sales in around three years.

The index staying above the neutral point of 50 suggests companies in Asia are not expecting an imminent global recession, but languishing near multi-year lows indicates companies are exerting caution.

"We don't see a global hard landing as a likely scenario when we look at economic factors such as inflation and credit conditions," said economist Young Sun Kwon at Nomura in Hong Kong. "But there are big uncertainties in politics."

Lessons from the 2008-2009 global financial meltdown have forced countries to strengthen economic defences, but factors like Britain's planned exit from the European Union and the US Federal Reserve's uncertain path are posing threats. With less than two weeks before the March 29 divorce date, British Prime Minister Theresa May's government is still struggling to push a departure deal with the EU through Parliament.

In the US, the Fed has declared a pause in its tightening campaign but economists see at least one more increase this year despite signs of slowdown in major economies.

Respondents to the survey included Canon, Suzuki Motor, Thai Beverage and Delta Electronics Thailand.

REUTERS

A version of this article appeared in the print edition of The Straits Times on March 21, 2019, with the headline 'Asia business mood near 3-year low amid trade concerns: Poll'. Print Edition | Subscribe