Asia’s largest companies wary about business outlook: INSEAD/Thomson

Reuters: Asian businesses remain wary about the future, though the overall trend is on the upswing according to the latest INSEAD/Thomson-Reuters Asia Business Sentiment Survey, issued 20 March 2013. The index, which surveys 100 executives in 11 Asia-Pacific countries, registered 65 in the first quarter of 2013, up from 63 in the last quarter of 2012. A reading above 50 indicates a positive outlook.

Global economic uncertainty continues to rank as the biggest business risk across all sectors and countries. Rising costs were the second highest business risk, ahead of regulatory uncertainty, political instability and foreign exchange volatility.

Export-dependent economies such as China, Japan and South Korea were most concerned about the business outlook, each with index readings of 50. China’s drop was precipitous: down from the 64 recorded in the fourth quarter of 2012.

The drop comes amid continued worries about a growth slowdown and Government measures to cool property prices. Though business sentiment in Japan was slightly better than in December, currency fluctuations and rising prices remained major obstacles to any strong rebound from the 2012 low struck in December.

This comes as the new Government under Shinzo Abe is waging war on deflation and a strong Yen. Southeast Asia was a bright spot, with sentiment mostly optimistic, encouraged by government-driven investment in infrastructure and robust domestic spending.

Malaysia and the Philippines showed positive readings of 100 each. Strong local consumption growth and the availability of funding are helping to drive growth in Southeast Asia.

India was also optimistic, but less so than the last quarter. Citing rising costs as the biggest hurdle, Indian companies tempered their outlook to pull the index down to 80 from December’s 100. This comes as the Reserve Bank of India, India’s central bank, cut its key interest rate yesterday, the second time in 2013 to boost the country’s growth.

Regionally, the index for financials rose to the highest level in a year, with four firms reporting a positive outlook and none a negative view. Sentiment among property companies improved, and firms in the resources sector were also optimistic.

Food and beverage companies were the most bullish with an index reading of 88 for the quarter, its highest mark since this survey started in 2009.

Companies polled included Hyundai Heavy Industries, Toshiba Corp and PT Bumi Resources. Of the 93 that replied, nearly 69% reported a neutral outlook, about 30% were positive and 1% reported a negative outlook. The poll was conducted by Thomson Reuters and INSEAD between 4 and 15 March.