Consistent growth in Southeast Asia
Asia's top companies, especially those in the export engines of China, Japan and South Korea, are wary about their business outlook, while Southeast Asia is outperforming as a result of strong local consumption, the latest quarterly Thomson Reuters/Insead Asia Business Sentiment Survey showed.Global economic uncertainty ranks as the chief business risk across all sectors and all countries, as it has for the past year and a half, and is mainly responsible for the cautious sentiment despite a flood of global liquidity benefiting most economies. The Thomson Reuters/Insead Asia Business
Sentiment Index rose to 65 this month from 63 in December, when it edged up by 1 point from the September survey. A reading above 50 indicates an overall positive outlook.
Business sentiment in Southeast Asia's US$1.5 trillion economy was mostly optimistic, thanks to government-driven investment in infrastructure and robust domestic spending. Malaysia and the Philippines were the most positive with readings of 100 each.
"I think the good news so far this year is just kind of consistency. We have continued to see modest upgrades to GDP forecasts for Malaysia, Philippines and to some extent, Indonesia," said Gary Dugan, chief investment officer for Asia and the Middle East at private bank Coutts.
"People continue to enjoy the same old thing, which is growth that surprises forecasts, companies therefore delivering good earnings numbers which beat expectations," he said. Companies in China, Japan and Korea were the least positive with index readings of 50. The result from China was a steep drop from the 64 recorded in the fourth quarter of last year.
Across the Asia-Pacific region, rising costs were the second greatest business risk, ahead of regulatory uncertainty, political instability and foreign exchange volatility.
The index for financials rose to the highest in a year, with four firms reporting a positive outlook and none a negative view. Sentiment among property companies brightened, and firms in the resources sector were also optimistic.
The survey polled 100 executives in 11 Asia-Pacific countries from companies including Hyundai Heavy Industries, Toshiba Corp and PT Bumi Resources. Of the 93 that replied, nearly 69 per cent reported a neutral outlook, about 30 per cent were positive and 1 per cent reported a negative outlook.
The poll was conducted by Thomson Reuters in association with Insead, a global management and business school, between March 4-15.
Citing rising costs as the biggest hurdle, companies in India tempered their outlook to pull the index down to 80 from December's level of 100. Monetary policy is diverse in Asia, with some central banks in easing mode but others monitoring inflation and the effects of fund flows.