Confidence among Asian companies held near three-year lows, hastened along its downward path by the US-China trade dispute, according to the latest Thomson Reuters/INSEAD Asian Business Sentiment Index.
“Things have not gotten worse but a lot of uncertainty is putting companies in wait-and-see mode,” Antonio Fatas, a Singapore-based economics professor at INSEAD, said of U.S.-China talks on trade relations.
“In one week, it looks like they are promising and the week after it looks like they are going nowhere, and so there’s a lot of wait-and-see attitude,” he added, saying the uncertainty is forcing companies to put off investment decisions.
The Index, which tracks firms' six-month outlook, was flat in the March quarter from the previous quarter's 63, compared with a near three-year low of 58 set in the September quarter.
A reading above 50 means optimistic respondents outnumbered pessimists. But, the latest index still marks one of the five worst since the world started its recovery from the 2008-2009 global financial crisis.
A total of 100 companies from a range of sectors responded to the survey which was conducted in the first half of March. A global trade war was cited as their chief business risk by respondents for the third quarter in a row, although by a smaller margin. Higher interest rates emerged as the second biggest risk, followed by a slowing Chinese economy.
That the index is staying above the neutral point of 50 suggests companies in Asia are not expecting an imminent global recession, but languishing near multi-year lows indicates companies are exerting caution, stated the report.
“We don’t see a global hard landing as a likely scenario when we look at economic factors such as inflation and credit conditions,” said Young Sun Kwon, an economist at Nomura in Hong Kong. “But there are big uncertainties in politics.”