Sentiment at some of Asia’s biggest firms has deteriorated as a slowing Chinese economy, Greek sovereign debt crisis and looming US interest rate hike create deepening concern about the state of the world economy.
Companies in India recorded the steepest fall in confidence, logging 84 from 97 in the previous quarter, as fervour over the election of pro-business Prime Minister Narendra Modi last year gives way to anxiety about whether two rate cuts this year can reignite a sluggish economy.
The Thomson Reuters/INSEAD Asian Business Sentiment Index fell to 70 for the June quarter, from 71 in March and 74 in the same period last year. A reading over 50 indicates an overall positive view.
Though gradual, the decline suggests the wait-and-see approach of top businesses is evolving from a passing phase to ingrained cautiousness as questions persist about the structural soundness of economies in China, Europe and the United States.
“Progress in some areas is compensated by increasing risks in another,” said INSEAD Professor Antonio Fatas.
“There is increasing concern for China and possibly for other emerging markets in the region as the US Federal Reserve starts raising rates. There is no great excitement to compensate for the risks of the region and the broader world economy.”
The biggest gainer was Thailand, scoring 94 versus 79, as firms adjusted to the disruption of a May 2014 military coup as well as two rate cuts which the central bank said had stabilised the economy.
Chinese firms were the least optimistic for the first time in nine quarters, with a score near flat at 55. The world’s second-largest economy so far this year has grown its slowest in over half a decade dogged by concerns of a property bubble and soft data on retail sales, industrial output and fixed asset investment.
