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Trade War Main Risk In Next 6 Months For Asian Businesses: New Survey


12/20/2018


Trade War Main Risk In Next 6 Months For Asian Businesses: New Survey
A Thomson Reuters/INSEAD survey noted a very cautious optimism within Asian companies for the last quarter of the current year as they closely watch the outcome of the trade negotiations between the US and China during the 90 day truce opt the trade war.
 
In the October-December quarter the Thomson Reuters/INSEAD Asian Business Sentiment Index moved up a bit to 63 compared to the almost three-year low of 58 for the previous period as represented by the six-month outlook of 84 firms.
 
A positive outlook is considered to be present if the score is above 50. Despite the increase, the number is still amongst the lowest since the mid-2015 fall in Chinese stocks which ultimately hit the world market. 
 
"This confirms the reading of the previous quarter: there is more uncertainty, there are increasing concerns about growth," said Antonio Fatas, a Singapore-based economics professor at global business school INSEAD.
 
"This doesn't mean there is going to be a crisis over the next quarters, but if there is one, this is an indication that it wouldn't be a large surprise to some." The respondents once again cited the possibility of a global trade war as the primary business risk. Also cited as reasons was the increasing rate of interest and a slowdown in China, the second largest economy of the world. The survey, conducted between Nov 30 to Dec 14m, span across 11 Asia-Pacific countries and a range of industries.
 
There was however some sense of optimism, after the agreement between US President Donald Trump and Chinese leader Xi Jinping earlier this month on the side lines of the G20 summit in Argentina for a 90 day truce in the trade war between the countries with the US delaying implementation of additional tariffs, from 10 per cent to 25 per cent, on Chinese goods worth $200 billion and allow space for trade negotiations.
 
However there is also scepticism about the deal. The trade deficit that the US has with China has been blamed on Beijing by Trump for long and America has also accused China of engaging in unfair trade practices and theft of intellectual property and technology of American companies. on the other hand, following the imposition of the trade tariffs by Trump ion Chinese goods, Washington has been called protectionist by Beijing and has said the US has been intimidating it.
 
The existence of global value chains is the reason that businesses in the Asian region are weary of a trade war between the world's two biggest economies.
 
The most pessimistic view about the near future was expressed by companies in the tech and telecoms sector with a lowest-ever score of 44. These two industry sectors have already been hit on rising concerns of global demand slowing down.
 
"Everyone is under pressure from valuations anyway in this sector," said Suresh Sidhu, chief executive officer of Malaysian telecoms firm edotco Group Sdn Bhd. "The fact that the trade war and currencies, particularly if you are Asian, start to mess with your revenue and earnings models has added another whammy."
 
As a country, businesses in Taiwan were the most pessimistic with a score of 17.  Amongst the other most pessimistic countries were businesses surveyed in mature economies such as Korea and Japan. in comparison, businesses in Philippines, Thailand, Malaysia were the most optimistic.
 
(Source:www.businesstimes.com.sg)


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