Thai firms' outlook improves in Q3 regional survey
DESPITE THE deterioration in business sentiment in much of Asia, Southeast Asia was mostly upbeat in the third quarter, with the Philippines winning a unanimous vote of confidence across all 12 companies surveyed, an uptick from the previous quarter, acco
Businesses in Thailand were mostly positive or neutral, strengthening from multi-year lows hit last quarter, with three positive about business outlook and four remaining neutral.
Both Malaysia and Singapore fell from the previous quarter, with the majority of businesses in both countries citing uncertainty in the global economy as the biggest risk. Indonesia had the lowest index score, slumping from last quarter’s perfect outlook, as businesses cited domestic inflation and global uncertainty for a bleak outlook.
Companies in Indonesia were the most negative, with a reading of 25, a sharp drop from its second-quarter reading of 100 when it was one of the most positive. Indonesian companies are seeing an increase in their borrowing costs, with the central bank’s surprise hike in interest rates this month.
Mired in a four-and-a-half-year low, the Indonesian rupiah is the worst performer in Asia this year among currencies tracked by Reuters, having lost around 16 per cent against the US dollar.
The Philippines was the most positive economy with a reading of 100 – the only economy with a top score – compared with its reading of 94 in the second quarter. Australia was the second most positive with a reading of 79, up from 75.
Across Asia, the sentiment deteriorated in the third quarter, interrupting three consecutive quarters of an improvement, with global economic uncertainty remaining the biggest concern for the region’s firms.
The Thomson Reuters/INSEAD Asia Business Sentiment Index fell to 66 in the third quarter from 71 in the second quarter when it reached the highest level in more than a year.
An index reading above 50 indicates an overall positive outlook.
The poll conducted by Thomson Reuters News in association with INSEAD, a global business and management school, surveyed more than 100 executives in 11 Asia-Pacific economies across sectors including automobiles, financials, resources, food and retail.
Of the 90 companies that replied to the poll, held between September 2 and 13, two-thirds reported a neutral outlook, just less than one-third were positive on their prospects and about 1 per cent reported a negative outlook.
Some of the weakest readings came from North Asia’s export-orientated economies of mainland China, South Korea and Taiwan, and regional trading hub Singapore, all of which turned in readings of 50 – highlighting the impact of a stuttering global economy.
“Asian companies are still maintaining a relatively cautious outlook regarding their earnings-growth prospects,” said Fan Cheuk Wan, chief investment officer for the Asia-Pacific region at Credit Suisse’s private banking and wealth management unit. “It could be partly related to the recent volatility across the emerging economies over the past three months.”
Asian equities, currencies and bonds have taken a beating over the past few months after the US Federal Reserve hinted it would halt its nearly five-year policy of flooding markets with cheap cash.
“This market volatility also inevitably has an impact on the perception and business sentiment of Asian corporates, as they are still assessing the global growth outlook,” Fan said.
The survey showed that shipping and financial sectors were the most negative, with a third-quarter score of 50, a sharp drop from the shipping industry’s reading of 80 and financials’ reading of 78 in the second quarter.
China showed no signs of improvement, with business sentiment staying flat for a third consecutive quarter as all eight companies surveyed said their business outlook remained neutral. However, markets have been comforted by the latest batch of economic data, adding to evidence that China may have avoided a sharp slowdown.
“We do know that Europe continues to struggle and there was a soft patch a few months ago in China,” said Craig James, chief economist at Commonwealth Securities in Sydney. “There’s also the fact that while there’s a recovery under way in the United States, it’s somewhat patchy.
“So I think the export-orientated economies are basically suffering as a result of that,” James said. “The good news is more recent data seem to suggest a little bit more momentum returning to some of the major economies and regions, but there is a lag in effect.”
