Thomson Reuters/INSEAD Asian Business Sentiment Survey

Transcription

1 CHINA/JAPAN/INDIA/AUSTRALIA/SOUTH KOREA/INDONESIA/TAIWAN/THAILAND/MALAYSIA/SINGAPORE/PHILIPPINES Sentiment index near steady at 71 in Q1 vs 72 in Q4 Indian firms most positive, Chinese, Singaporean least Optimism strengthens in Japan, drops in Australia Property sector most positive, financial least Thomson Reuters/INSEAD Asian Business Sentiment Survey

2 Office workers walk to the train station during evening rush hour in the financial district of Singapore, March 9, REUTERS/EDGAR SU Asian business sentiment steady in Q1 as U.S. rate hike fear keeps firms in check By Engen Tham Concern over a U.S. interest rate hike kept sentiment in check at some of Asia s biggest firms, as optimism about the outlook for business over the next six months was near steady in the first quarter, a Thomson Reuters/INSEAD survey showed. The Thomson Reuters/INSEAD Asian Business Sentiment Index was 71 for the March quarter versus 72 three months earlier. A reading above 50 indicates an overall positive view. Companies in India were the most upbeat for the fourth straight quarter, logging 97 on hopes that low inflation and aggressive interest rate cuts will boost the domestic economy. Singapore firms registered the least positive outlook for the third consecutive quarter in anticipation of the first U.S. rate hike in almost a decade, which could happen as early as June. Local banks are likely to match the hike, making mortgages expensive and pulling down demand for property. There is significant risk as people may have different interpretations of movements in interest rates in a way that can cause dramatic changes in financial markets, said Antonio Fatas, a Singaporebased economics professor at INSEAD. China s reading rose to 54 from 50, as businesses became more optimistic about their future amid central bank efforts to moderate the economic slowdown with looser monetary policy, including successive interest rate cuts since late last year. Optimism slid the most in Australia where firms reported a score of 70 from 2

3 85 in the fourth quarter, as falling prices of commodities tempered sentiment in the resource-exporting nation. The poll, by Thomson Reuters with global business and management school INSEAD, was conducted over the first two weeks of March. Of 111 respondents, 45 percent reported a positive outlook, 51 percent were neutral and 4 percent were negative. Participating firms included Japanese beverage conglomerate Asahi Group Holdings Ltd, South Korean shipbuilder Hyundai Heavy Industries Co Ltd and Australian building materials maker James Hardie Industries PLC. RISING RATES, FALLING OIL Strong U.S. jobs data has fanned expectations of a rate hike in the next few months. Low U.S. rates had prompted investors to flood Asia with cheap, speculative funds that could be pulled out as the rates rise. In developed economies such as Singapore, where a property boom is fuelling lending, the knock-on effect of a rise in local rates could make repayments expensive. The combination of really rapid lending growth and prospect of rising interest rates is quite worrying, said Daniel Martin, senior Asia economist at Capital Economics. Fear of a U.S. hike is balanced somewhat by relief afforded by a drop in global oil prices, reducing energy costs across the board. Oversupply and limited storage capacity has left the price of U.S. crude at a six-year low. The fall in gasoline and energy prices means households have more money to spend, so it s positive for real income, Martin said. Overall, the survey showed Asian firms consider global economic uncertainty as the biggest threat to their six-month business outlook, followed by rising costs and other risks such as regulatory change and increased competition. PROPERTY TOPS, FINANCE WEAK Companies in the property sector were the most positive in the survey with a reading of 88, a one-point increase from the previous poll. Retail and drugs followed with 82 and 81 respectively, from 83 and 70. Financial institutions, dogged by regulatory uncertainty and a lingering hangover from the global financial crisis, were least positive with a score of 55, though that was an improvement from 50 in the previous two quarters. A robust economic recovery and low interest rates are boosting business at finance houses in Taiwan such as Yuanta Investment Consulting, said the company s chief economist, Aidan Wang. Yuanta plans to expand this year and anticipates an increase in hiring, Wang told Reuters. Elsewhere, the picture was more subdued. Finance firms anywhere in the world are very weak, said INSEAD s Fatas. It s a combination of the financial crisis, a lack of confidence, and increased regulation which has made business very complex. Business sentiment index Thomson Reuters/INSEAD Asian Business Sentiment Index Source: Thomson Reuters/INSEAD Biggest perceived risks to business outlook By number of respondents FX volatility 6 Other risks* 23 Rising costs 37 Source: Thomson Reuters/INSEAD Global economic uncertainty 61 Note: Total no. of respondents = 111; includes multiple responses * Includes regulatory change, reduced consumer spending, increased competition etc. MSCI Asia-Pacific

4 A shipyard of Hyundai Heavy Industries is seen in Ulsan, about 410 km (255 miles) southeast of Seoul, June 28, REUTERS/LEE JAE-WON Highlights BY ECONOMY AUSTRALIA: STEEPEST DECLINE AT 70 VS 85 IN Q4 Australian firms logged the biggest fall in optimism in the first quarter, losing 15 points from their highest-ever reading just three months earlier. Of the 15 respondents, eight had positive outlooks, five neutral and two negative. Companies said new orders and employment levels improved from the previous quarter, with one-third reporting increased staff. The majority of Australian companies flagged global economic uncertainty as their top concern, while two firms said the domestic economy was the main worry. CHINA: BETTER OUTLOOK AT 54 VS 50 IN Q4 Sentiment in China rose slightly from the lowest positive reading of 50, with just one of 14 respondents having a bright outlook and the rest pointing to neutral. Six firms booked higher new orders versus seven in the previous quarter, and only one took on more staff versus two in the previous three months. China set an economic growth target of around 7 percent for 2015 during the first quarter, but growth in investment, retail sales and factory output all missed analyst estimates in January and February, falling to multi-year lows. Despite the slowing growth at home, the biggest perceived risk for eight respondents was the global economic uncertainty, with rising costs also cited. INDIA: STILL MOST OPTIMISTIC AT 97 VS 100 IN Q4 Companies in India expressed the most positive business outlook for the fourth straight quarter with a reading of 97, missing 4

5 the maximum score of 100 for the first time in a year. High expectations for the government of pro-business Prime Minister Narendra Modi lifted the index, with 14 of 15 respondents reporting a positive outlook; 12 booking increased new orders and seven adding staff. Rising costs and global economic uncertainty, however, were the top worries cited by seven and five respondents respectively. JAPAN: FIRMLY POSITIVE AT 64 VS 56 IN Q4 Optimism in Japan hit its highest since the second quarter of 2010, after the economy emerged from recession towards the end of last year. But domestic economic uncertainty was flagged as a primary cause of concern, with a decline in capital expenditure in the fourth quarter, a sign that a rebound in consumer spending is not encouraging business investment. Of 18 respondents, 11 expressed a neutral outlook while one was negative, with more companies reporting increased employment than in the last quarter. SOUTH KOREA: OPTIMISM DENTED AT 68 VS 75 IN Q4 Business confidence in South Korea took a dip in a quarter when Finance Minister Choi Kyung-hwan said economic recovery was weak. Five of 14 respondents said their outlook was positive while the rest were neutral, with most concerns related to the global economy. On the upside, nine firms booked an increase in new orders versus six in the previous quarter. TAIWAN: CONFIDENCE DIPS TO 67 VS 71 IN Q4 The outlook of Taiwanese corporations in the first quarter was little changed, with two companies reporting higher employment versus four in the previous quarter. All respondents said new orders declined, and that global economic uncertainty was their main risk. SOUTHEAST ASIA: THAILAND 79 VS 81, PHILIPPINES 75 VS 67, SINGAPORE 50 VS 50; INDONESIA AT 75, MALAYSIA AT 64 The second-most optimistic businesses were in Thailand, where a military government is restructuring state-controlled firms. Four of seven respondents reported a positive outlook with the global economy as their main risk factor. Four booked a rise in new orders compared with seven in the prior quarter. The Philippines was in third place with 75, recovering from a drop to 67 in the fourth quarter. It was matched by Indonesia, which was not represented in the previous survey, whereas Malaysia - also absent last time around - was at 64. Singaporean firms were again the least positive with a reading of 50, identical to the previous two quarters. Writing by Shihar Aneez 111 companies responded to the Thomson Reuters/INSEAD poll, conducted March 2-14, 2015 Economy Australia China India Indonesia Japan S. Korea Malaysia Philippines Singapore Taiwan Thailand Business outlook New orders Employment Total Neg. Neutral Positive Decreased Same Increased Lower Same Higher

6 Mannequins are displayed at Fast Retailing s flagship Uniqlo store in Tokyo s Ginza district, March 16, REUTERS/ISSEI KATO Highlights BY SECTOR PROPERTY: SURVEY S MOST OPTIMISTIC AT 88 VS 87 IN Q4 Sentiment among property developers hit its highest since the third quarter of 2013, with 75 percent of respondents having positive outlooks. Chinese companies extended their neutral expectations amid a glut of housing supply, though their new orders picked up from the previous three months. RETAIL: ALMOST UNCHANGED AT 82 VS 83 IN Q4 Optimism among retailers eased incrementally from the fourth quarter, when their index hit its highest since the survey began in Seven of 11 respondents, which included Uniqlo owner Fast Retailing Co Ltd, had positive outlooks, with more employment at six versus five whose staffing was unchanged. DRUGS: NEAR 3-YEAR HIGH AT 81 VS 70 IN Q4 Sentiment at drugmakers jumped to a level unseen in almost three years with outlooks positive at five of eight respondents, which featured India s second-biggest drugmaker by market value, Lupin Ltd. Half booked an increase in new orders, but just one company increased staffing. 6

7 FOOD: FEAR OF RISING COSTS LEFT INDEX AT 80 VS 81 IN Q4 Rising costs amounted to the most common concern among food firms, whose optimism edged down from what was the most bullish result since early Respondents included Japanese brewers Asahi Group Holdings Ltd and Kirin Holdings Co Ltd. BUILDING: SENTIMENT DROPS TO 79 VS 100 IN Q4 Sentiment among building firms dropped from the last quarter, with those from South Korea and Australia - including the world s top fibre cement products maker, James Hardie Industries PLC - flagging concerns about global economic uncertainty. RESOURCES: ONE-YEAR LOW AT 67 VS 74 IN Q4 The outlook for firms in the resources sector fell to a one-year low, with just seven of 21 respondents expressing optimism, versus 10 in the previous quarter. More than half of respondents singled out global economic uncertainty as their biggest fear, while some put rising costs at the top of their risk list. TECH: SMALL REVIVAL AT 64 VS 58 IN Q4 Sentiment edged up from a two-year low as 39 percent of respondents had positive outlooks, versus 38 percent last time, with two-thirds fretting over global economic uncertainty. Respondents included Japan s Canon Inc, the world s biggest camera maker, which made a $2.8 billion offer for network video surveillance leader Axis AB last month. SHIPPING: NEARLY NEUTRAL AT 58 VS 50 IN Q4 Most shippers attributed their neutral business outlook to global economic uncertainty, while just one firm was positive, having hired new staff during the quarter and posting a rise in new orders. Respondents included South Korea s Hyundai Heavy Industries Co Ltd, the world s top shipbuilder. AUTOS: OPTIMISM LOWEST IN A YEAR AT 57 VS 75 IN Q4 Automakers were the least positive in a year as global economic uncertainty clouded the outlook at six of seven respondents, while just one respondent reported new hires. FINANCIALS: LEAST POSITIVE AGAIN AT 55 VS 50 IN Q4 Global economic uncertainty remained the key risk for a mostly neutral outlook among Asian financial companies, with two positive outlooks ensuring the sector avoided a third straight reading of 50. Of the respondents - which included Taiwan s Yuanta Financial Holdings Co Ltd - four booked new orders, five reported no change and two said new orders fell. Writing by Mai Nguyen 111 companies responded to the Thomson Reuters/INSEAD poll, conducted March 2-14, 2015 Sector Autos Building Financials Food Drugs Property Resources Retail Shipping Tech Business outlook New orders Employment Total Neg. Neutral Positive Decreased Same Increased Lower Same Higher

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