CHINA/JAPAN/INDIA/AUSTRALIA/SOUTH KOREA/INDONESIA/TAIWAN/THAILAND/MALAYSIA/SINGAPORE/PHILIPPINES

Sentiment index rises to 72 in Q4 from 66 in Q3

Indian companies most positive; Chinese, Singaporean least
Taiwanese sentiment recovers, Australia climbs
Building, property, retail sector sentiment highest
Financial, shipping sectors least optimistic

Thomson Reuters/INSEAD
Asian Business Sentiment Survey

Thomson Reuters/INSEAD ASIAN BUSINESS SENTIMENT SURVEY

DECEMBER 2014

A worker operates a lathe machine as he makes a steel cutter at a factory in Noida, on the outskirts of New Delhi, India, Nov. 3, 2014.
REUTERS/ANINDITO MUKHERJEE

Asian business sentiment

rebounds in Q4 with India
most optimistic
By Tommy Wilkes

Business sentiment among Asias top companies rebounded in the fourth quarter to
the second-highest level in almost three
years, a Thomson Reuters/INSEAD survey
showed, helped by a stronger U.S. economy
and a plunge in oil prices.
The Thomson Reuters/INSEAD Asian
Business Sentiment Index increased to 72

in the fourth quarter from 66 in the previous three months. The result was only
slightly below the 74 reading of the second quarter which was the highest since
early 2012. A reading above 50 indicates an
overall positive outlook.
Indian businesses provided the biggest
boost to the index, with companies reporting a maximum score of 100 for the third
consecutive quarter as they look to new

Prime Minister Narendra Modi to speed

up economic recovery.
Corporations in China, where worries
about a slowdown in economic growth
persist, were among the least positive with
a reading of 50, coming in below Japan,
which is stuck in recession, at 56.
U.S. unemployment fell to a six-year low
in November, a signal that the worlds biggest economy and a key export destination
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Thomson Reuters/INSEAD ASIAN BUSINESS SENTIMENT SURVEY

for Asian companies is healthier and its

consumers are growing in confidence.
The U.S.s economic leadership is influencing expectations across the world, and
the U.S. is really becoming stronger, said
Antonio Fatas, a Singapore-based economics professor at INSEAD.
Asia is a region where there is not massive uncertainty related to political risk.
This is a region that grows with the world.
The rosier picture in the United States
coincided with oil prices falling to five-year
lows, boosting Asian economies dependent
on imports of crude.
Fatas cautioned that uncertainty remained, not least in China where investors
and companies are sitting and waiting for
data to indicate how dramatically growth
in Asias largest economy is slowing.
Global economic uncertainty remained
the biggest concern for Asian businesses
during the quarter, the survey showed, as
well as rising costs and other risks such as
regulatory change.
I am surprised that the U.S. and oil
prices seem to have outweighed concerns
about China and Europe. The downside
risks to Chinas growth are significant, especially related to real estate and shadow
banking, said Dariusz Kowalczyk, a senior
economist at Credit Agricole.
Companies participating in the survey
included Japanese drugs maker Daiichi
Sankyo Co Ltd, South Koreas Hyundai
Heavy Industries Co Ltd and Indian real
estate developer DLF Ltd.
The poll, by Thomson Reuters in association with INSEAD, a global management and business school, was conducted
from Dec. 1-13.
Of the 116 companies that responded,
51 percent gave a positive outlook, while
42 percent reported a neutral outlook and
7 percent were negative.

AUSTRALIA, TAIWAN UP, JAPAN

STAYS WEAK
Oil prices plunged during the quarter as
supplies flooded the market while economic growth and energy demand were limited.
Frederic Neumann, co-head of Asian

DECEMBER 2014

A vendor smokes a cigarette in front of sacks of potatoes piled on a truck at a wholesale market in
Taiyuan, Shanxi province, China, Feb. 17, 2014. REUTERS/JON WOO

economic research at HSBC, said the fall

was a big relief for many Asian manufacturing exporters and probably helped outweigh
continued worries about the global economy.
There are still lingering risks but the
risks are probably manageable. Even though
global growth is disappointing, businesses
are more optimistic because they see moves
towards structural reforms, he said, referring to policy changes in India, Indonesia
and China.
In Australia - this years chair of the
Group of 20 major economies - companies
were more positive. The country scored 85,
up from 75 in the last quarter, while sentiment in Taiwan turned positive, jumping to
71 from 33.
The Philippines suffered the steepest decline in optimism, with a drop to 67 from
83, while Japanese sentiment remained
poor as respondents worried about the domestic economy.
Positive sentiment among building firms
was highest, doubling from last quarter to a
one-year high of 100. This was followed by
property developers with a score of 87 versus 63, and retail, which jumped to 84 from
63 to its best level since the survey began
in 2009.
Shipping and financial companies were
the least positive.
INSEADs Fatas said the oil price fall
was likely still being digested by individual

Business sentiment
index improves in Q4
Thomson Reuters/INSEAD
Business Sentiment Index (LHS)
MSCI Asia-Pacific ex-Japan (RHS)
80

600

70

500

60

400

50

2010 2011 2012 2013 2014

300

Source: Thomson Reuters/INSEAD

Asian companies and would filter through

to more positive outlooks across sectors in
coming months.
My expectation is that the next quarter
will be better than this one.
Editing by Christopher Cushing
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Thomson Reuters/INSEAD ASIAN BUSINESS SENTIMENT SURVEY

DECEMBER 2014

A worker lays fish on a mat for drying during dry fish processing at Cilincing beach in North Jakarta, Indonesia, June 5, 2013. REUTERS/BEAWIHARTA

Highlights
BY SECTOR
BUILDING: BETTER REALTY
(INDEX AT 100 VS 50 IN Q3)

PROPERTY: MORE CONFIDENT

(INDEX AT 87 VS 63 IN Q3)

Sentiment hit a one-year high as all seven

firms surveyed, including the worlds top
fibre cement products maker James Hardie
Industries PLC, gave a positive outlook. Five
reported higher orders and sales, versus two
of four firms in the prior three months.

Optimism surged to the highest in over a

year, with 11 of 15 companies positive about
the outlook, versus four positives last time.
Respondents included Indias largest real
estate developer, DLF Ltd.
Chinese firms were neutral amid worries

about the domestic market, where cities are

battling excess housing supply.

RETAIL: HIGHEST SINCE 2009

(INDEX AT 83 VS 63 IN Q3)
Sentiment among retailers hit its highest
since the survey began in 2009 after two
quarterly drops, with six of nine firms
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Thomson Reuters/INSEAD ASIAN BUSINESS SENTIMENT SURVEY

DECEMBER 2014

giving positive outlooks versus two of eight

surveyed last time.
Rising costs were the biggest concern,
including for Japans biggest convenience
store operator Seven & I Holdings Co Ltd
which has been hit by weakening consumer
spending.

FOOD: BULLISH
(INDEX AT 81 VS 75 IN Q3)
Food firms were their most bullish since early
2013, with most showing higher orders and
sales. Rising costs, however, were among the
worries for respondents, including Japans
Asahi Group Holdings Ltd.

TECH: DOWNTIME
(INDEX AT 58 VS 68 IN Q3)
Sentiment dropped to a two-year low as five
of 24 firms polled negative, versus none from
the 19 surveyed last time. Global economic
uncertainty was the top risk cited by firms,
including Japans Canon Inc - the worlds
largest camera maker - and Hitachi Ltd.

DRUGS: LESS OPTIMISTIC

(INDEX AT 70 VS 75 IN Q3)
Drugmakers were less optimistic with two
of five polling positive. Comparisons were
hurt as the third-quarter survey had 10
participants. Respondents included Lupin
Ltd, Indias No.2 drugmaker by market value.

RESOURCES: SLIGHT SLIP

(INDEX AT 74 VS 75 IN Q3)
The outlook edged lower as two firms,
including Australias Oil Search Ltd, reversed
their forecast to negative from positive in the
prior three months. Two others saw a drop in
orders and sales, compared with one in the
third quarter.
Global economic worries hobbled
resource companies, with energy-related
firms hit by a 40 percent rout in oil prices
over the past five months.

A staff member of an Aeon supermarket changes a price tag due to a sales tax hike before the
store opens in Chiba, east of Tokyo, Japan, March 31, 2014 REUTERS/YUYA SHINO

rose at four automakers. Global economic

uncertainty and rising costs were among
the biggest worries for most participants,
including Indias Hero MotoCorp Ltd.

Biggest perceived risks

to business outlook
Survey for Q4 2014

FINANCIALS: IN NEUTRAL
(INDEX STEADY AT 50)

Currency
volatility
4

The outlook steadied, after dropping for

two quarters, as all 10 participants polled
neutral, including Taiwans Yuanta Financial
Holdings Co Ltd. In the third quarter, two
of 14 were negative. Global economic
uncertainty remained the key risk.

Other
risks*
34

SHIPPING: TREADS WATER

(INDEX STEADY AT 50)

Rising
costs
37

This sectors outlook was mired at one-year

lows as one of six firms polled negative while
another saw sales and orders drop. South
Koreas Hyundai Heavy Industries Co Ltd,
the worlds top shipbuilder, was one of the
respondents.

Global
economic
uncertainty
59

Note: Some respondents indicated more than one

perceived risk. Total no. of respondents: 116
*Includes changes in policy, regulation and
infrastructure etc.
Source: Thomson Reuters/INSEAD

AUTOS: 3-YEAR HIGH

(INDEX STEADY AT 75)

Reporting by Himani Sarkar; Editing by

Christopher Cushing

Sentiment among automakers held steady

at a three-year high. Three of six respondents
polled positive, while new orders and sales

Note: Companies surveyed may change from

one quarter to the next.
5

Thomson Reuters/INSEAD ASIAN BUSINESS SENTIMENT SURVEY

DECEMBER 2014

Cargo vessels are seen at the main port of Manila, the Philippines, Aug. 20, 2014. REUTERS/ROMEO RANOCO

Highlights
BY ECONOMY

AUSTRALIA: SENTIMENT STRONGER

(INDEX AT 85 VS 75 IN Q3)
Confidence among companies in Australia
- this years chair of the Group of 20 major
economies - was second only to India in
the fourth quarter with an outlook index of
85, up from 75 in the third quarter. Of 13
responses, 10 were positive and two neutral,
taking the country to its highest reading
since the survey began five years ago.
Companies said new orders and
employment levels were largely steady
compared with three months prior, while
four firms reported increased staff. Like many

regional peers, Australian firms flagged

global economic uncertainty as their top
concern.

CHINA: UNCHANGED AT THE

BOTTOM (INDEX AT 50 VS 50 IN Q3)
Sentiment in China was unchanged as all
16 companies polled reported a neutral
outlook, although six firms booked higher
orders compared with only three in the
previous quarter. With an index of 50 - the
lowest possible positive reading - China
tied with Singapore as the regions least
optimistic economy.

During the quarter, Chinas stuttering

economy showed slowing growth in factory
output and investment, which neared a 13year low. Global economic uncertainty was the
top risk identified by eight survey participants,
with greater domestic competition and
political uncertainty also cited.

INDIA: STEADY AT THE TOP

(INDEX AT 100 VS 100 IN Q3)
Firms in India logged the most optimistic
outlook for the third consecutive quarter,
buoyed by high expectations for the new
government of pro-business Prime Minister
6

Thomson Reuters/INSEAD ASIAN BUSINESS SENTIMENT SURVEY

DECEMBER 2014

A building under construction is

seen amid smog on a polluted
day in Shenyang, Liaoning
province, China, Nov. 21, 2014.
REUTERS/JACKY CHEN

Narendra Modi. All 23 respondents reported

a positive outlook, with 20 saying new orders
increased and eight adding staff.
Rising costs and global economic
uncertainty were tied as the top worries, each
with seven responses.

JAPAN: DOWN SLIGHTLY

(INDEX AT 56 VS 59 IN Q3)
Optimism in Japan hovered at 56, almost
unchanged from 59, with more respondents
worrying about a domestic economy that
has fallen into recession and thrown up fresh
challenges for Prime Minister Shinzo Abes
reflationary policies.
Of 18 respondents, 12 were neutral on the
outlook while two turned negative, versus
zero in the previous survey. Companies
reported new orders and employment levels
similar to the last quarter.

SOUTH KOREA: MARKED

IMPROVEMENT
(INDEX AT 75 VS 50 IN Q3)
South Korea rebounded strongly with a
reading of 75, up from 50, in a quarter
when Finance Minister Choi Kyung-hwan
pledged to maintain policies to re-energise
the economy and keep risks under control.

Half of respondents said their outlook was

positive, with the rest neutral.
While most companies remained
concerned about the global economy,
a handful shifted attention to currency
concerns, citing lower purchasing power as a
main headache.

TAIWAN: SIGNIFICANTLY HIGHER

(INDEX AT 71 VS 33 IN Q3)
The outlook index of Taiwanese corporations
turned positive in the fourth quarter, jumping
from 33 to 71 - the highest since the first
quarter of last year. Among the seven
companies surveyed, four were positive
compared with zero previously.
Half the respondents considered
regulatory uncertainty to be their primary
risk while the remainder said global
economic uncertainty posed the main threat.
More than half said they hired more staff
after keeping employment steady in the
previous quarter.

SOUTHEAST ASIA: MIXED

(THAILAND AT 81 VS 90;
PHILIPPINES AT 67 VS 83;
SINGAPORE AT 50 VS 50)
Singapore stayed put at 50 and Thailand

fell one place to third, while the Philippines

suffered the surveys steepest drop in
optimism.
The outlook in Thailand eased to 81 from
90, with about half of eight respondents
reporting steady orders and job numbers.
Political uncertainty and volatility in energy
prices overtook global economic uncertainty
as the main risks.
Confidence in the Philippines fell for
the third consecutive quarter, with the
index sliding to 67 from 83. Five of nine
respondents said they were positive about
the business outlook, with most reporting
increases in new orders.
Singaporean firms remained the least
optimistic, with 80 percent having a neutral
outlook and reporting unchanged levels of
employment.
Companies in Indonesia and Malaysia,
which lodged 75 and 67 respectively in the
third quarter, did not respond to the latest
survey.
Reporting by Jean Chua; Editing by
Christopher Cushing
Note: Companies surveyed may change from
one quarter to the next.
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Thomson Reuters/INSEAD ASIAN BUSINESS SENTIMENT SURVEY

DECEMBER 2014

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