New Straits Times

ASIAN FIRMS’ CONFIDENCE SLUMPS TO 3-YEAR LOW

Companies wary of worsening global trade war and China economic slowdown

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CONFIDENC among Asian companies slumped to the weakest in almost three years in the third quarter as businesses feared blowback from a worsening global trade war, a Thomson Reuters/Insead survey showed.

Representi­ng the six-month outlook of 104 firms, the Thomson Reuters/Insead Asian Business Sentiment Index fell to 58 for the July-September quarter, its lowest since the fourth quarter of 2015, from 74 three months before.

It was a second straight quarter-on-quarter decline for the index and the pace of the fall was the steepest recorded since the survey began in 2009. A reading above 50 indicates a positive outlook. “The fall in the index could be a strong signal of an economic slowdown,” said Antonio Fatas, a Singapore-based economics professor at global business school Insead, adding that the survey results had historical­ly correlated well with changes in economic growth in Asia Pacific.

“We have witnessed a cyclical upturn in the world economy that had to come to an end. We see the end of the cycle in advanced economies as well as emerging markets. This survey confirms that these fears are real,” he said.

A global trade war was cited as the chief business risk by respondent­s, while the second most identified risks were a China economic slowdown and currency fluctuatio­ns. The survey was conducted from August 31 through September 14.

United States President Donald Trump escalated his trade war with China on Monday, imposing 10 per cent tariffs on about US$200 billion (RM828.04 billion) worth of Chinese imports and warning of further tariffs if China takes retaliator­y action. China responded by adding US$60 billion of US products to its import tariff list.

Analysts say a trade war between the world’s two biggest economies may only modestly impact growth in both countries, but will have far reaching implicatio­ns on others due to global value chains, especially with much of Asia depending on China for trade.

Neverthele­ss, the sub-index for China nosedived to 25 from 63, representi­ng the lowest reading ever and its first negative outlook. Japanese companies also turned pessimisti­c.

The souring Sino-US relationsh­ip has also reduced investors’ risk appetite and exacerbate­d outflows from emerging markets, which have also been hit by rising US interest rates and fear of contagion from financial crises in Turkey and Argentina.

Battered by outflows, the Indian rupee, Indonesia’s rupiah and the Philippine peso have been emerging Asia’s biggest currency decliners so far this year. Delhi, Jakarta and Manila have raised interest rates to support their currencies, among other measures.

Respondent­s to the survey included Oil Search, Reliance Industries, Suzuki Motor, Asahi Group, Canon, Central Plaza Hotel and Delta Electronic­s.

 ?? AFP PIC ?? United States President Donald Trump escalated his trade war with China on Monday, imposing 10 per cent tariffs on about US$200 billion worth of Chinese imports.
AFP PIC United States President Donald Trump escalated his trade war with China on Monday, imposing 10 per cent tariffs on about US$200 billion worth of Chinese imports.

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