MUMBAI • Confidence among Asian companies in the June quarter fell to its lowest since the 2008-09 financial crisis, as the US-China trade war disrupts global supply chains and shows little sign of easing soon, a Thomson Reuters/ Insead survey found.
The Thomson Reuters/Insead Asian Business Sentiment Index tracking companies' six-month outlook worsened in the three months ended June to 53, versus 63 in the previous two quarters.
A reading above 50 means optimistic respondents outnumbered pessimists, but worries about the threat of a prolonged trade war drove the index to its lowest since the June quarter of 2009, when the first edition of the survey was released.
"There was a big dip (in the index) three quarters ago, and we felt it was the uncertainty about the trade war and people were worried about the future," said Professor Antonio Fatas, a Singapore-based economics don at global business school Insead.
"We get a sense after four quarters of low numbers that now, it's not just uncertainty. This is a true slowdown in growth. We see activity declining - it's not just the expectation that activity will decline," Prof Fatas added.
For a fourth straight quarter, survey participants cited the global trade war as the chief risk to business, followed by Brexit and a slowdown in the Chinese economy.
The survey interviewed 95 companies in 11 Asia-Pacific countries that together contribute about a third of global gross domestic product and are home to 45 per cent of the world's population. It was conducted from May 31 to June 14.
With the index staying above the neutral point of 50, it suggests companies in the region are not expecting an imminent global recession, but the decade low indicates caution was rising as trade tensions mount.
The United States and China have been embroiled in a trade stand-off since last year, marked by tit-for-tat import tariffs, as Washington looks to force Beijing to make changes to its business policies. Talks between the two sides to reach a detente ended last month without a deal.
We get a sense after four quarters of low numbers that now, it's not just uncertainty. This is a true slowdown in growth. We see activity declining - it's not just the expectation that activity will decline.
PROFESSOR ANTONIO FATAS, an economics don at business school Insead.
Washington's move to put Huawei, the world's largest telecommunications equipment manufacturer, on an export blacklist that bars US companies from doing business with the Chinese firm without special approval further ratcheted up tensions.
Still, US President Donald Trump has said that a deal would "eventually" be struck.
BNP Paribas, however, does not expect a resolution to the trade war this year, said Mr Manishi Raychaudhuri, Asia-Pacific equity strategist at the banking group.
The trade tensions are hurting supply lines, especially those for higher-end smartphones, with many manufacturers looking to move production out of China and into places such as Vietnam, Taiwan and Bangladesh, Mr Raychaudhuri noted.
These changes, however, "can't be made overnight", he added.
US-based Broadcom, which makes radio-frequency chips used in Apple's iPhones and iPads, last week forecast a US$2 billion (S$2.7 billion) hit to annual sales from the trade tensions and the Huawei ban.
Huawei has acknowledged a harder-than-expected hit from the ban and slashed its revenue forecast for the year. China's economy is also feeling the heat, with industrial output growth sliding to a 17-year low last month.
Respondents to the survey included Japan's Nikon, South Korea's Samsung Electronics, India's Tata Consultancy Services and Reliance Industries, as well as Thailand's PTT PCL.