Asia business confidence at 2-year high in Q1: Survey

SINGAPORE – Business sentiment at Asia’s top companies rose to its highest in almost two years, in the first three months of 2017, buoyed by positive economic signs from the United States and China, a Thomson Reuters/Insead survey showed.

The Thomson Reuters/Insead Asian Business Sentiment Index, which polled 96 firms on their six-month outlook, rebounded to a score of 70 for the first quarter of the year, from 63 in the last quarter of 2016.

A reading over 50 indicates a positive view.

During the quarter, the US and China, two top destinations for Asian exporters, reported a slew of upbeat economic data that exceeded market expectations.

“Optimism about the US 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, in a statement.

South-east Asian economies, such as Singapore, Malaysia, the Philippines and Thailand, reported the biggest jump. In February, Singapore’s non-oil domestic exports grew at their strongest pace in five years, boosted by demand for locally made electronic as well as non-electronic goods.

Shipments to China, Singapore’s largest export destination, soared by 65.1 per cent, extending the previous month’s growth of 36.9 per cent, led by petrochemicals and specialised machinery.

“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,” noted Mr Santitarn Sathirathai, head of emerging Asia economics at Credit Suisse in Singapore.

China and India bucked the general trend, recording a slight decline in business sentiment from the previous quarter. While the US remains a significant player in the region, Asian economies have stepped up trade with China, whose growing presence was highlighted after the US withdrawal earlier this year by US President Donald Trump from the 12-nation Trans Pacific Partnership.

Economists, however, caution that the current high level of optimism may have been built on shaky ground, as a series of risk events is expected to re-emerge soon.

The tumble in Asia’s equities market yesterday bore out some of that caution, as stocks in Asia nosedived on increasing fears that Mr Trump’s promised pro-growth policies, including financial deregulation and corporate tax cuts, may struggle through the US Congress.

“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 Mr Mark Williams.

Despite the broader improvement in sentiment in the region, uncertainty over Mr Trump’s policies, US dollar rate and demand from China were still seen as the biggest risks to Asian companies’ outlook.