sentiment index rises to 72 in q4 from 66 in q3 • indian...
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Thomson Reuters/INSEADAsian Business Sentiment Survey
• Sentiment index rises to 72 in Q4 from 66 in Q3• Indian companies most positive; Chinese, Singaporean least• Taiwanese sentiment recovers, Australia climbs• Building, property, retail sector sentiment highest• Financial, shipping sectors least optimistic
CHINA/JAPAN/INDIA/AUSTRALIA/SOUTH KOREA/INDONESIA/TAIWAN/THAILAND/MALAYSIA/SINGAPORE/PHILIPPINES
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Thomson Reuters/INSEAD ASIAN BUSINESS SENTIMENT SURVEY DECEMBER 2014
By Tommy Wilkes
Business sentiment among Asia’s top com-panies rebounded in the fourth quarter to the second-highest level in almost three years, a Thomson Reuters/INSEAD survey showed, helped by a stronger U.S. economy and a plunge in oil prices.
The Thomson Reuters/INSEAD Asian Business Sentiment Index increased to 72
in the fourth quarter from 66 in the pre-vious three months. The result was only slightly below the 74 reading of the sec-ond quarter which was the highest since early 2012. A reading above 50 indicates an overall positive outlook.
Indian businesses provided the biggest boost to the index, with companies report-ing a maximum score of 100 for the third consecutive quarter as they look to new
Prime Minister Narendra Modi to speed up economic recovery.
Corporations in China, where worries about a slowdown in economic growth persist, were among the least positive with a reading of 50, coming in below Japan, which is stuck in recession, at 56.
U.S. unemployment fell to a six-year low in November, a signal that the world’s big-gest economy and a key export destination
Asian business sentiment rebounds in Q4 with India most optimistic
A worker operates a lathe machine as he makes a steel cutter at a factory in Noida, on the outskirts of New Delhi, India, Nov. 3, 2014.
REUTERS/ANINDITO MUKHERJEE
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Thomson Reuters/INSEAD ASIAN BUSINESS SENTIMENT SURVEY DECEMBER 2014
for Asian companies is healthier and its consumers are growing in confidence.
“The U.S.’s economic leadership is influ-encing expectations across the world, and the U.S. is really becoming stronger,” said Antonio Fatas, a Singapore-based econom-ics professor at INSEAD.
“Asia is a region where there is not mas-sive uncertainty related to political risk. This is a region that grows with the world.”
The rosier picture in the United States coincided with oil prices falling to five-year lows, boosting Asian economies dependent on imports of crude.
Fatas cautioned that uncertainty re-mained, not least in China where investors and companies are “sitting and waiting for data” to indicate how dramatically growth in Asia’s largest economy is slowing.
Global economic uncertainty remained the biggest concern for Asian businesses during the quarter, the survey showed, as well as rising costs and other risks such as regulatory change.
“I am surprised that the U.S. and oil prices seem to have outweighed concerns about China and Europe. The downside risks to China’s growth are significant, es-pecially related to real estate and shadow banking,” said Dariusz Kowalczyk, a senior economist at Credit Agricole.
Companies participating in the survey included Japanese drugs maker Daiichi Sankyo Co Ltd, South Korea’s Hyundai Heavy Industries Co Ltd and Indian real estate developer DLF Ltd.
The poll, by Thomson Reuters in asso-ciation with INSEAD, a global manage-ment and business school, was conducted from Dec. 1-13.
Of the 116 companies that responded, 51 percent gave a positive outlook, while 42 percent reported a neutral outlook and 7 percent were negative.
AUSTRALIA, TAIWAN UP, JAPAN STAYS WEAKOil prices plunged during the quarter as supplies flooded the market while econom-ic growth and energy demand were limited.
Frederic Neumann, co-head of Asian
economic research at HSBC, said the fall was a “big relief for many Asian manufactur-ing exporters” and probably helped outweigh continued worries about the global economy.
“There are still lingering risks but the risks are probably manageable. Even though global growth is disappointing, businesses are more optimistic because they see moves towards structural reforms,” he said, refer-ring to policy changes in India, Indonesia and China.
In Australia - this year’s chair of the Group of 20 major economies - companies were more positive. The country scored 85, up from 75 in the last quarter, while senti-ment in Taiwan turned positive, jumping to 71 from 33.
The Philippines suffered the steepest de-cline in optimism, with a drop to 67 from 83, while Japanese sentiment remained poor as respondents worried about the do-mestic economy.
Positive sentiment among building firms was highest, doubling from last quarter to a one-year high of 100. This was followed by property developers with a score of 87 ver-sus 63, and retail, which jumped to 84 from 63 to its best level since the survey began in 2009.
Shipping and financial companies were the least positive.
INSEAD’s Fatas said the oil price fall was likely still being digested by individual
Asian companies and would filter through to more positive outlooks across sectors in coming months.
“My expectation is that the next quarter will be better than this one.”
Editing by Christopher Cushing
A vendor smokes a cigarette in front of sacks of potatoes piled on a truck at a wholesale market in
Taiyuan, Shanxi province, China, Feb. 17, 2014. REUTERS/JON WOO
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Business sentimentindex improves in Q4
Source: Thomson Reuters/INSEAD
Thomson Reuters/INSEADBusiness Sentiment Index (LHS)MSCI Asia-Pacific ex-Japan (RHS)
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Thomson Reuters/INSEAD ASIAN BUSINESS SENTIMENT SURVEY DECEMBER 2014
BUILDING: BETTER REALTY (INDEX AT 100 VS 50 IN Q3)Sentiment hit a one-year high as all seven firms surveyed, including the world’s top fibre cement products maker James Hardie Industries PLC, gave a positive outlook. Five reported higher orders and sales, versus two of four firms in the prior three months.
PROPERTY: MORE CONFIDENT (INDEX AT 87 VS 63 IN Q3)Optimism surged to the highest in over a year, with 11 of 15 companies positive about the outlook, versus four positives last time. Respondents included India’s largest real estate developer, DLF Ltd.
Chinese firms were neutral amid worries
about the domestic market, where cities are battling excess housing supply. RETAIL: HIGHEST SINCE 2009 (INDEX AT 83 VS 63 IN Q3)Sentiment among retailers hit its highest since the survey began in 2009 after two quarterly drops, with six of nine firms
HighlightsBY SECTOR
A worker lays fish on a mat for drying during dry fish processing at Cilincing beach in North Jakarta, Indonesia, June 5, 2013. REUTERS/BEAWIHARTA
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Thomson Reuters/INSEAD ASIAN BUSINESS SENTIMENT SURVEY DECEMBER 2014
giving positive outlooks versus two of eight surveyed last time.
Rising costs were the biggest concern, including for Japan’s biggest convenience store operator Seven & I Holdings Co Ltd which has been hit by weakening consumer spending. FOOD: BULLISH (INDEX AT 81 VS 75 IN Q3)Food firms were their most bullish since early 2013, with most showing higher orders and sales. Rising costs, however, were among the worries for respondents, including Japan’s Asahi Group Holdings Ltd. TECH: DOWNTIME (INDEX AT 58 VS 68 IN Q3)Sentiment dropped to a two-year low as five of 24 firms polled negative, versus none from the 19 surveyed last time. Global economic uncertainty was the top risk cited by firms, including Japan’s Canon Inc - the world’s largest camera maker - and Hitachi Ltd. DRUGS: LESS OPTIMISTIC (INDEX AT 70 VS 75 IN Q3)Drugmakers were less optimistic with two of five polling positive. Comparisons were hurt as the third-quarter survey had 10 participants. Respondents included Lupin Ltd, India’s No.2 drugmaker by market value. RESOURCES: SLIGHT SLIP (INDEX AT 74 VS 75 IN Q3)The outlook edged lower as two firms, including Australia’s Oil Search Ltd, reversed their forecast to negative from positive in the prior three months. Two others saw a drop in orders and sales, compared with one in the third quarter.
Global economic worries hobbled resource companies, with energy-related firms hit by a 40 percent rout in oil prices over the past five months. AUTOS: 3-YEAR HIGH (INDEX STEADY AT 75)Sentiment among automakers held steady at a three-year high. Three of six respondents polled positive, while new orders and sales
rose at four automakers. Global economic uncertainty and rising costs were among the biggest worries for most participants, including India’s Hero MotoCorp Ltd. FINANCIALS: IN NEUTRAL (INDEX STEADY AT 50)The outlook steadied, after dropping for two quarters, as all 10 participants polled neutral, including Taiwan’s Yuanta Financial Holdings Co Ltd. In the third quarter, two of 14 were negative. Global economic uncertainty remained the key risk.
SHIPPING: TREADS WATER (INDEX STEADY AT 50)This sector’s outlook was mired at one-year lows as one of six firms polled negative while another saw sales and orders drop. South Korea’s Hyundai Heavy Industries Co Ltd, the world’s top shipbuilder, was one of the respondents. Reporting by Himani Sarkar; Editing by Christopher Cushing
Note: Companies surveyed may change from one quarter to the next.
A staff member of an Aeon supermarket changes a price tag due to a sales tax hike before the store opens in Chiba, east of Tokyo, Japan, March 31, 2014 REUTERS/YUYA SHINO
Biggest perceived risks to business outlook
Source: Thomson Reuters/INSEAD
*Includes changes in policy, regulation and infrastructure etc.
Note: Some respondents indicated more than one perceived risk. Total no. of respondents: 116
Globaleconomic
uncertainty59
Risingcosts37
Other risks*34
Currencyvolatility
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Survey for Q4 2014
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Thomson Reuters/INSEAD ASIAN BUSINESS SENTIMENT SURVEY DECEMBER 2014
AUSTRALIA: SENTIMENT STRONGER(INDEX AT 85 VS 75 IN Q3)Confidence among companies in Australia - this year’s chair of the Group of 20 major economies - was second only to India in the fourth quarter with an outlook index of 85, up from 75 in the third quarter. Of 13 responses, 10 were positive and two neutral, taking the country to its highest reading since the survey began five years ago.
Companies said new orders and employment levels were largely steady compared with three months prior, while four firms reported increased staff. Like many
regional peers, Australian firms flagged global economic uncertainty as their top concern.
CHINA: UNCHANGED AT THE BOTTOM (INDEX AT 50 VS 50 IN Q3)Sentiment in China was unchanged as all 16 companies polled reported a neutral outlook, although six firms booked higher orders compared with only three in the previous quarter. With an index of 50 - the lowest possible positive reading - China tied with Singapore as the region’s least optimistic economy.
During the quarter, China’s stuttering economy showed slowing growth in factory output and investment, which neared a 13-year low. Global economic uncertainty was the top risk identified by eight survey participants, with greater domestic competition and political uncertainty also cited.
INDIA: STEADY AT THE TOP (INDEX AT 100 VS 100 IN Q3)Firms in India logged the most optimistic outlook for the third consecutive quarter, buoyed by high expectations for the new government of pro-business Prime Minister
HighlightsBY ECONOMY
Cargo vessels are seen at the main port of Manila, the Philippines, Aug. 20, 2014. REUTERS/ROMEO RANOCO
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Thomson Reuters/INSEAD ASIAN BUSINESS SENTIMENT SURVEY DECEMBER 2014
Narendra Modi. All 23 respondents reported a positive outlook, with 20 saying new orders increased and eight adding staff.
Rising costs and global economic uncertainty were tied as the top worries, each with seven responses.
JAPAN: DOWN SLIGHTLY (INDEX AT 56 VS 59 IN Q3)Optimism in Japan hovered at 56, almost unchanged from 59, with more respondents worrying about a domestic economy that has fallen into recession and thrown up fresh challenges for Prime Minister Shinzo Abe’s reflationary policies.
Of 18 respondents, 12 were neutral on the outlook while two turned negative, versus zero in the previous survey. Companies reported new orders and employment levels similar to the last quarter.
SOUTH KOREA: MARKED IMPROVEMENT (INDEX AT 75 VS 50 IN Q3)South Korea rebounded strongly with a reading of 75, up from 50, in a quarter when Finance Minister Choi Kyung-hwan pledged to maintain policies to re-energise the economy and keep risks under control.
Half of respondents said their outlook was positive, with the rest neutral.
While most companies remained concerned about the global economy, a handful shifted attention to currency concerns, citing lower purchasing power as a main headache.
TAIWAN: SIGNIFICANTLY HIGHER (INDEX AT 71 VS 33 IN Q3)The outlook index of Taiwanese corporations turned positive in the fourth quarter, jumping from 33 to 71 - the highest since the first quarter of last year. Among the seven companies surveyed, four were positive compared with zero previously.
Half the respondents considered regulatory uncertainty to be their primary risk while the remainder said global economic uncertainty posed the main threat. More than half said they hired more staff after keeping employment steady in the previous quarter.
SOUTHEAST ASIA: MIXED (THAILAND AT 81 VS 90; PHILIPPINES AT 67 VS 83; SINGAPORE AT 50 VS 50)Singapore stayed put at 50 and Thailand
fell one place to third, while the Philippines suffered the survey’s steepest drop in optimism.
The outlook in Thailand eased to 81 from 90, with about half of eight respondents reporting steady orders and job numbers. Political uncertainty and volatility in energy prices overtook global economic uncertainty as the main risks.
Confidence in the Philippines fell for the third consecutive quarter, with the index sliding to 67 from 83. Five of nine respondents said they were positive about the business outlook, with most reporting increases in new orders.
Singaporean firms remained the least optimistic, with 80 percent having a neutral outlook and reporting unchanged levels of employment.
Companies in Indonesia and Malaysia, which lodged 75 and 67 respectively in the third quarter, did not respond to the latest survey.
Reporting by Jean Chua; Editing by Christopher Cushing
Note: Companies surveyed may change from one quarter to the next.
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seen amid smog on a polluted
day in Shenyang, Liaoning
province, China, Nov. 21, 2014.
REUTERS/JACKY CHEN
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Thomson Reuters/INSEAD ASIAN BUSINESS SENTIMENT SURVEY DECEMBER 2014
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