Business confidence down in Asia amid global uncertainty

SINGAPORE — Asia’s top companies, especially those in export-oriented economies, including Singapore, were more wary in their business outlook for the third quarter, due to concerns over uncertainty in the global economy.

The latest 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.

It surveyed more than 100 executives from 90 major companies in 11 Asia-Pacific countries.

The downbeat sentiment is mainly due to volatility in both advanced and emerging economies, said INSEAD Economics Professor Antonio Fatas.

“The US and Europe are not recovering fast enough and we’re also seeing worrying signs coming from the emerging markets over the past month. The combination of low growth in advanced economies and a potential crisis in emerging markets would suggest a weaker global economy,” he said.

Concerns over global economic uncertainty were felt most strongly among Asia’s export economies of Singapore, Taiwan, South Korea, Malaysia and Indonesia, which posted the weakest readings. Those from China and Japan were unchanged.

Companies in Singapore registered a reading of 50, compared with 83 in the second quarter, the index showed.

The data came a day after International Enterprise Singapore announced an unexpected 6.2 per cent on-year decline in non-oil domestic exports (NODX) last month.

The weak figure had surprised most economists, who were expecting exports to grow amid a gradual improvement in the global economy. But that recovery has been slower than expected and markets are bracing for further volatility due to the impending tapering of quantitative easing in the United States.

Despite these uncertainties, some analysts still see a positive outlook ahead.

“If we consider forward-looking indicators, we do see quite solid evidence showing that global growth recovery should be providing support for an improved growth outlook for Asia,” said Ms Fan Cheuk Wan, Credit Suisse’s Chief Investor Officer for Asia-Pacific.

Just last month, the US manufacturing sector recorded its fastest growth in more than two years, while the European Central Bank earlier this month upgraded its growth forecast for the eurozone this year.

“The good news is, recent data seems to suggest a little bit more momentum returning to some of the major economies and regions, but there is a lag in effect,” said Mr Craig James, Chief Economist at Australia’s Commonwealth Securities.

INSEAD’s Prof Fatas added that the survey, which was conducted between Sept 2 and 13, should be considered alongside more recent global developments.

“Right now, there’s more clarity on who the next Chairman of the US Federal Reserve will be and people see that as a positive; and there’s also less pressure on Asian currencies now,” he said. “Uncertainties do remain but, if I were to conduct the survey this week, businesses might be more confident.”