Asia’s Business Sentiment Slips from Seven Year High on Trade Worries

Worried business person
Image: baona/iStockPhoto

Business confidence among Asian companies slipped for the first time in three quarters, on mounting worries that US President Donald Trump's protectionist policies would trigger tit-for-tat reprisals and undermine the global trading system, said INSEAD recently.

The Thomson Reuters/INSEAD Asian Business Sentiment Index—representing a six-month outlook from 61 firms—fell to 74 in the second quarter from a seven-year high of 79 in the prior three months, based on a survey done during June 1-15.

While a reading above 50 indicates a positive outlook, this is the first time the number has dropped since September 2017, the business school explained.

The risks to growth are increasingly real now, said Antonio Fatas, a Singapore-based economics professor at global business school INSEAD. "Trade war is not a risk but a reality," he said.

"US tariffs are going up against China but also against some of its traditional allies, such as Canada and the EU,” he noted. “They are all about to retaliate and today we do not see an easy way out.”

"Companies can try to go around tariffs by moving production to other countries, this is costly and inefficient. It is a short-term solution but not optimal," Fatas said.

Asia remains relatively resilient

However, Malaysia-based RHB Banking Group's chief economist, Arup Raha, noted that some Asian economies, with strong external balance sheets, are relatively resilient to global turmoil.

"Besides, global growth, especially in the US and China, is still good. Also, wage growth in Asia is signaling domestic strength," Raha pointed out.

China's GDP has expanded at a steady 6.8% for three straight quarters, though there are concerns such as rapid credit growth and trade frictions, INSEAD observed.

By industry, retail and leisure was the most bullish, while construction and engineering as well as autos were the weakest, the business school said, adding that most sectors surveyed expressed concern about trade tensions and higher interest rates.

According to INSEAD, some of the respondents to the survey include Asahi Group, SoftBank Group, Ayala Corp, and  Delta Electronics.


Suggested Articles

Some of you might have already been aware of the news that Questex—with the aim to focus on event business—will shut down permanently all media brands in Asia…

Some advice for transitioning into an advisory role

Global risks are intensifying but the collective will to tackle them appears to be lacking. Check out this report for areas of concern