SYDNEY: Confidence among Asian businesses rebounded sharply this quarter to hit an 18-month high with firms reporting a pickup in sales, though most are holding off on hiring as trade war uncertainty weighs, a Thomson Reuters/INSEAD survey found.
FILE PHOTO: People stand near a window overlooking the financial district in Shanghai, China October 23, 2019. Picture taken October 23, 2019. REUTERS/Stringer
The Thomson Reuters/INSEAD Asian Business Sentiment Index tracking firms’ six-month outlook jumped 13 points to 71 for the fourth quarter. That lifted confidence from close to a decade low in the previous quarter to its highest since June last year.
The swing is also the strongest turnaround since the tail end of the eurozone debt crisis in 2011, when China was pouring stimulus into its economy as well.
A reading above 50 means optimistic respondents outnumbered pessimists.
This quarter revealed a noticeable shift from neutral to optimistic, and showed the strongest reading on sales growth in a year. Yet the majority of firms are not yet confident enough to plan hiring.
“Conditions, expectations and some of the uncertainty has improved over the last quarter,” said Antonio Fatas, economics professor at global business school INSEAD in Singapore, pointing to easing tensions between China and the United States.
“But I don’t see this uncertainty disappearing, I think some of these tensions are going to stay with us maybe for years or decades.”
Respondents rated their chief risk as the Sino-US trade war, which has been a regular feature in the survey for much of the past two years as the conflict has weighed on global growth.
A total of 102 companies responded to the survey, conducted in 11 Asia-Pacific countries where 45 per cent of the world’s population lives and almost a third of global gross domestic product is generated.
Participants included firms in industries as varied as automaking, tourism and energy, such as Japan’s Suzuki Motor Corp, Thai hotelier Minor International PCL and Australia’s Oil Search Ltd.
The survey was conducted from November 29 to December 13, as Chinese and US negotiators finalised a “phase-one” deal to reduce some tariff barriers.
The most recent International Monetary Fund global growth projections forecast the trade war will drag the world’s economy to its slowest pace of expansion since the 2008-9 financial crisis.
“Although the external environment remains challenging, Minor is confident that we will be able to withstand such challenges,” said Chaiyapat Paitoon, deputy corporate chief financial officer at Minor International.
The firm has sought to diversify, increasing its stake to control nearly all of Spain’s NH Hotels Group last year, and has grown its food segment with the November purchase of a Korean fried chicken franchise in Thailand. — Reuters