Companies open their wallets, boosting world economy

Companies across the developing world are stepping up investment to meet rising demand from industrial economies in what’s shaping up as a further spur to already buoyant global growth.

Big industrial economies including the US and Japan led the recent recovery in capital expenditure. Now, such investment is broadening to emerging countries with Morgan Stanley’s tracker of economies not including China now at its highest level since 2011.

“It is going from synchronised growth to synchronised capex,” said Chetan Ahya, co-head of global economics at Morgan Stanley in Hong Kong. Executives are racing to keep up with demand by pouring money into research and new plants. While that spending gives another sugar hit to the global economy, the effects should be longer lasting too as productivity is boosted and pay checks fattened.

Much of the capex recovery can be chalked up to the booming production of smartphones and electric vehicles. A wave of upgrades by the likes of Apple and Samsung Electronics is spurring demand in the semiconductor industry, where global capex is estimated to grow nearly 30 per cent in the next 12 months, according to Bloomberg Intelligence. That’s a boon for Asia’s tech focused exporters like Japan, South Korea and Taiwan.

Win Semiconductors in Taiwan, which makes laser components for the iPhone X’s Face ID function, plans to increase capex to NT$7 billion ($239 million) this year from NT$4 billion in 2017.