Thursday June 21, 2012

Asian business sentiment down

SINGAPORE: Asia's top companies are less upbeat on their business outlook than in the first quarter, with mounting concern over the eurozone crisis and a slowdown in China's growth, according to the latest Thomson Reuters/INSEAD Asia Business Sentiment Survey.

The Thomson Reuters/INSEAD Asia Business Sentiment Index slid to 69 in June from 74 in March, when it saw a dramatic 14-point jump from the December survey. A reading above 50 indicates an overall positive outlook.

“It's obvious there are a few macro headwinds,” said James Koh, analyst at Maybank Kim Eng in Singapore. “Companies are understandably a little worried. On one hand, you have the Greek fallout and, on the other hand, we have already seen a mild deceleration of growth in China.”

Of the record 177 Asian companies polled, 78 said their business outlook for the next six months was positive, while 87 said it was neutral, and 12 were negative. The poll was conducted by Thomson Reuters in association with INSEAD, a global management and business school in Singapore and France, from June 415.

Asked what was the biggest risk factor they face, 111 companies said global economic uncertainty, and 28 cited rising costs.

“Things are looking tougher with what's happening in the global economy. Asia is not fully insulated but will still do relatively better given that most governments in the region still have leeway to stimulate domestic economies,” said Kristy Fong, investment manager at Aberdeen Asset Management Asia.

“Cost pressures are another issue, such as rising inflationary pressures in Singapore (and) infrastructure and logistical bottlenecks in India,” Fong added.

Carey Wong, analyst at OCBC Investment Research, said that end-consumers were turning more cautious in placing orders. “As long as customers don't give them very clear order indications, sentiment won't be that good. As a business owner, you can't plan ahead, such as planning capital expenditure.”

Sentiment in industry sectors heavily dependent on the global economy, such as shipping and financials, deteriorated the most, the quarterly survey showed.

“Asian businesses the big exporters face potential weakness in essentially most of their end-markets,” said Nick Paulson-Ellis, the India head at Espirito Santo Securities. - Reuters

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