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Asia business sentiment falls in Q4

Asia business sentiment falls in Q4 - Thomson Reuters/INSEAD survey

• Sentiment index falls to 62 in Q4 from 66 in Q3
• Biggest risk is global economic uncertainty
• Southeast Asia hit by political crisis, typhoon
• Upbeat sentiment in China and India

Reuters - 18 December 2013
By Joyce Lee

Business sentiment among Asia's top companies dropped sharply in the fourth quarter, extending last quarter's declines, with global economic uncertainty and rising costs weighing on the region's firms, a Thomson Reuters/INSEAD survey showed. The Thomson Reuters/INSEAD Asia Business Sentiment Index fell to 62 in the fourth quarter from 66 in the third quarter of 2013, the lowest reading since the third quarter of 2012. A reading above 50 indicates an overall positive outlook.

Sentiment in Southeast Asia's $1.5 trillion economy was undermined by political turbulence in Thailand and a typhoon in the Philippines, causing dismal readings of 40 and 58 respectively, which were the lowest for both countries since the poll was first compiled in 2009. Although China and India's bullish scores of 75 and 82 respectively supported the index, export-driven north Asian economies such as South Korea as well as regional trading hub Singapore also showed weaker readings, underscoring still-anaemic global business conditions.

"The global economic recovery is still very fragile," Zhang Shiyuan, an economist at Shanghai-based Southwest Securities Co said. "There is a fundamental problem that there's still too much debt. It's a time bomb that may be detonated if monetary and fiscal policies don't coordinate well."

The survey showed that the auto sector was the most negative with a reading of 33, a sharp drop from 63 in the previous quarter, followed by the food and resources sectors with fourth-quarter scores of 50. The index surveyed more than 100 of the Asia-Pacific region's top companies including Hyundai Heavy Industries, Fast Retailing and International Container Terminal Services Inc (ICTSI) in 11 economies, across sectors including property, financials and tech. The poll, conducted by ThomsonReuters in association with INSEAD, a global management and business school, was compiled between Dec. 2-13. Of the 128 companies that responded, two-thirds reported a neutral outlook while less than 30 percent were positive in their prospects.

SOUTHEAST ASIA HIT, CHINA & INDIA SUPPORT

Among ASEAN countries that had remained comparatively upbeat earlier this year, Malaysia remained the only bright spot with a score of 75, up from 69 in the last quarter. In contrast, companies in Thailand were the most negative in Asia with a 40 index reading, plunging from 71 in the previous quarter as signs of prolonged political uncertainty due to anti-government protests against Yingluck Shinawatra's ruling party hit business sentiment.

Corporate sentiment in the Philippines tumbled to 58 from the maximum score of 100 in the previous quarter due to the devastating effects of typhoon Haiyan in early November that killed more than 5,200 people and destroyed an estimated 24 billion pesos ($543.60 million) in crops and infrastructure.

Among north Asian economies, Japan retreated to a fourth-quarter score of 55 from 63 in the previous quarter as the buzz around Abenomics deflated. The outlook in South Korea remained steady at a neutral 50.

A glimmer of hope came from China, the world's second-largest economy, which showed an uptick in fourth-quarter sentiment to 75 after holding steady at 50 earlier this year. "The companies appear to be upbeat on the expectation that overseas demand for Chinese exports will improve. Hopes stemming from the government's reform measures announced in Q3, and rising income levels that could drive spending, are also causes for positive sentiment," said Cui Hongmei, a China market analyst at Seoul-based Daewoo Securities Co.

India's bullish outlook also supported the index, with a fourth-quarter score of 82 compared to 67 in the previous quarter as improving manufacturing conditions in the 1.3 billion-strong country shrunk the trade deficit by 23 percent between April-November 2013.

RISING COSTS WEIGH ON DEFENSIVES

Broken down by sector, builders in Asia were the most bullish with a maximum reading of 100 for the second consecutive quarter, followed by pharmaceuticals and property sectors with readings of 75. Defensive sectors such as food and retail were both down from the previous quarter to readings of 50, as companies cited rising costs as their biggest risk.

- End -

About Thomson Reuters

Thomson Reuters is the world's leading source of intelligent information for businesses and professionals. We combine industry expertise with innovative technology to deliver critical information to leading decision makers in the financial and risk, legal, tax and accounting, intellectual property and science and media markets, powered by the world's most trusted news organization. With headquarters in New York and major operations in London and Eagan, Minnesota, Thomson Reuters employs approximately 60,000 people and operates in over 100 countries. Thomson Reuters shares are listed on the Toronto and New York Stock Exchanges. For more information, go to www.thomsonreuters.com.

About INSEAD, The Business School for the World

As one of the world’s leading and largest graduate business schools, INSEAD brings together people, cultures and ideas to change lives and to transform organisations. A global perspective and cultural diversity are reflected in all aspects of our research and teaching.

With campuses in Europe (France), Asia (Singapore) and Abu Dhabi, INSEAD’s business education and research spans three continents. Our 145 renowned Faculty members from 35 countries inspire more than 1,000 degree participants annually in our MBA, Executive MBA, specialised master’s degrees (Master in Finance, Executive Master in Consulting and Coaching for Change) and PhD programmes. In addition, more than 9,000 executives participate in INSEAD’s executive education programmes each year.

In addition to INSEAD’s programmes on our three campuses, INSEAD participates in academic partnerships with the Wharton School of the University of Pennsylvania (Philadelphia & San Francisco); the Kellogg School of Management at Northwestern University near Chicago, and Johns Hopkins University/SAIS in Washington DC. In Asia, INSEAD partners with Tsinghua University in Beijing. INSEAD is a founding member in the multidisciplinary Sorbonne University created in 2012, and also partners with Fundação Dom Cabral in Brazil.

INSEAD became a pioneer of international business education with the graduation of the first MBA class on the Fontainebleau campus in Europe in 1960. In 2000, INSEAD opened its Asia campus in Singapore. And in 2007 the school began an association in the Middle East, officially opening the Abu Dhabi campus in 2010.

Around the world and over the decades, INSEAD continues to conduct cutting edge research and to innovate across all our programmes to provide business leaders with the knowledge and sensitivity to operate anywhere. These core values have enabled us to become truly "The Business School for the World."

More information about INSEAD can be found at www.insead.edu.

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