Asia firms' confidence
hits near two-year high on U.S., China pick-up: Thomson
Reuters/INSEAD
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[March 22, 2017]
By Yawen Chen and Ryan Woo
BEIJING
(Reuters) - Business sentiment at Asia's top companies rose to its
highest in almost two years in the first quarter of 2017, buoyed by
positive economic signs from the United States and China that
underpinned improved global demand, a Thomson Reuters/INSEAD survey
showed.
The Thomson Reuters/INSEAD Asian Business Sentiment Index, representing
the six-month outlook of 96 firms, rebounded to 70 for January-March
from 63 three months prior. A reading over 50 indicates a positive view.
During the quarter, the United States and China - two top destinations
for Asian exporters - reported a slew of upbeat economic data that was
far better than market expectations.
"Optimism about the U.S. economy, lack of immediate crisis in China,
lack of bad news in Europe ... have reduced some of the immediate
risks," said Singapore-based economics professor Antonio Fatas at global
business school INSEAD.
Sentiment in export-oriented Malaysia rebounded the most, with its
subindex jumping 20 points to a three-year high of 75, as most
respondents reported an increase in business volume and a third said
staffing had risen in the past three months. Sentiment also surged in
the Philippines by 18 points, with a subindex of 88 making the country
the most optimistic in Asia.
In other export-driven Asian countries too, such as Taiwan, Singapore
and Thailand, corporate sentiment improved significantly, while China
and India recorded a slight decline from the previous quarter.
"Stronger-than-expected export numbers have provided quite a relief for
those economies, at least more than they have for China or India which
are more domestically oriented," said Santitarn Sathirathai, head of
emerging Asia economics at Credit Suisse in Singapore.
But for Chinese companies such as beauty app Meitu <1357.HK>, strong
domestic appetite for new services and goods in the country also points
to a brighter business outlook that will see user traffic translate into
profit.
"The fact that Chinese consumers are demanding upgraded products and
services for beauty and entertainment is the basis of our confidence in
business outlook in the next six months," a spokesman said.
While the United States remains a powerful player in Asia, Asian
economies have stepped up trade with China, whose growing presence was
highlighted after the U.S. withdrawal earlier this year by President
Donald Trump from the 12-nation Trans Pacific Partnership.
Fearing trade retaliation by China over the deployment of a new missile
system, on top of a political crisis that led to the ouster of President
Park Geun-hye, South Korean firms' business sentiment - the weakest of
11 economies polled - tumbled 32 points to a subindex of 25, the lowest
in almost five years. China is South Korea's largest trading partner.
OVERLY OPTIMISTIC?
Economists say the current high level of optimism may have been built on
shaky ground as a series of risk events are expected to re-emerge soon.
"There's a lot of positive sentiment around but there's a risk that
people are simply extrapolating forward the recent better news," said
Capital Economics' chief Asia economist Mark Williams.
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A man walking past a clock shop is reflected on a glass wall at a
electronics market in Seoul, South Korea, June 8, 2016. REUTERS/Kim
Hong-Ji/File Photos
Despite the broader improvement in sentiment in the region, uncertainty over
Trump's policies, U.S dollar rate and demand from China were still seen as the
biggest risks to Asian companies' outlooks.
"The same confidence in the U.S. is met by many respondents worried about Trump
policies," INSEAD's Fatas noted, adding that Europe will be "back in the risk
lists" as French elections, whose results could fuel growing global trade
protectionism sentiments, are just around the corner.
Credit Suisse's Sathirathai said China's focus on stability this year ahead of a
major power reshuffle also means Beijing is less keen to splurge on stimulus,
which could potentially impact trade-dependent Asian nations.
China concluded its annual parliament meeting last week, at which policymakers
set a more modest growth target in 2017 as it turns to tackling financial risks.
Thomson Reuters and INSEAD polled companies from March 3 to 17. Of 96
respondents, 48 percent rated their six-month outlook as positive, 43 percent
were neutral and 8 percent were negative.
The Asia Pacific branch of British publishing company Taylor & Francis Group,
part of Informa Plc, was cautious about its outlook. Barry Clarke, managing
director of Asia Pacific at the group, said that was partly because last year
was much better than expected. "We wouldn't expect the same kind of growth."
FINANCIAL FIRMS MOST UPBEAT
By sector, companies engaged in financial services were the most upbeat with the
subindex rising to a near four-year high of 75 from 61 in the previous quarter,
driven by optimism about a normalization of monetary policy globally and a
rollback in onerous regulations.
The auto industry recorded the biggest jump in sentiment by increasing 27 points
to 67 in the quarter.
Sentiment was the lowest in the metals and chemical sector, falling to negative
territory for the first time with a subindex at 40. The sector mentioned U.S
dollar rate among its biggest concerns.
Respondents included Australia's Medibank, India's Reliance Industries, Bank
Rakyak Indonesia, Japan's Suzuki Motor and SoftBank, Malaysia's Kossan Rubber,
Union Bank of the Philippines and Thailand's Intouch Holdings.
The index started in 2009 with a record low of 45, but has largely hovered
between 60 and 70 since hitting a record high of 80 at the beginning of 2011.
PDF of survey: http://tmsnrt.rs/2modp93
For a graphic on business sentiment index, click http://tmsnrt.rs/2mnCKQD
For a graphic on biggest perceived risks, click http://tmsnrt.rs/2gU9mL9
Note: Companies surveyed can change from quarter to quarter.
(Reporting by Yawen Chen and Ryan Woo; Editing by Muralikumar Anantharaman)
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