Confidence among Asian companies in the third quarter of this year slumped to the weakest in almost three years 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-to-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.
Photo: AP
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 the global business school INSEAD, adding that the survey results had historically correlated well with changes in economic growth in the Asia-Pacific region.
“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 Chinese economic slowdown and currency fluctuations.
The survey was conducted from Aug. 31 through Friday last week.
US President Donald Trump on Monday escalated his trade war with China, imposing 10 percent tariffs on about US$200 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 have said a trade war between the world’s two biggest economies might only modestly affect growth in both countries, but would 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 from 63 to 25, representing the lowest reading ever and its first negative outlook.
Japanese companies also turned pessimistic.
“Because China has become the main target for the US, there is increasing uncertainty about the Chinese economy,” Fatas said.
The souring US-China 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, the Indonesian 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.
Despite these developments, the survey’s sub-indices showed firms in Indonesia and India were the most optimistic after Thailand.
Some in the Philippines were losing confidence, with its sub-index sliding from 94 to 61.
However, survey participant Metropolitan Bank and Trust Co remained upbeat, citing the Philippine government’s infrastructure push and steps to contain inflation as the main reasons for the view.
“Any infrastructure expenditure is good for the economy. This creates economic activity. This will help grow businesses of all sizes,” Anna Dominique Cudia, from the bank’s investor relations department, said in an e-mail.
In Indonesia, a perceived lower trade risk for Southeast Asia’s largest economy compared with some other countries supported business confidence, Indonesian Chamber of Commerce and Industry deputy chairwoman Shinta Widjaja Kamdani said.
China has claimed a breakthrough in developing homegrown chipmaking equipment, an important step in overcoming US sanctions designed to thwart Beijing’s semiconductor goals. State-linked organizations are advised to use a new laser-based immersion lithography machine with a resolution of 65 nanometers or better, the Chinese Ministry of Industry and Information Technology (MIIT) said in an announcement this month. Although the note does not specify the supplier, the spec marks a significant step up from the previous most advanced indigenous equipment — developed by Shanghai Micro Electronics Equipment Group Co (SMEE, 上海微電子) — which stood at about 90 nanometers. MIIT’s claimed advances last
Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) has appointed Rose Castanares, executive vice president of TSMC Arizona, as president of the subsidiary, which is responsible for carrying out massive investments by the Taiwanese tech giant in the US state, the company said in a statement yesterday. Castanares will succeed Brian Harrison as president of the Arizona subsidiary on Oct. 1 after the incumbent president steps down from the position with a transfer to the Arizona CEO office to serve as an advisor to TSMC Arizona’s chairman, the statement said. According to TSMC, Harrison is scheduled to retire on Dec. 31. Castanares joined TSMC in
EUROPE ON HOLD: Among a flurry of announcements, Intel said it would postpone new factories in Germany and Poland, but remains committed to its US expansion Intel Corp chief executive officer Pat Gelsinger has landed Amazon.com Inc’s Amazon Web Services (AWS) as a customer for the company’s manufacturing business, potentially bringing work to new plants under construction in the US and boosting his efforts to turn around the embattled chipmaker. Intel and AWS are to coinvest in a custom semiconductor for artificial intelligence computing — what is known as a fabric chip — in a “multiyear, multibillion-dollar framework,” Intel said in a statement on Monday. The work would rely on Intel’s 18A process, an advanced chipmaking technology. Intel shares rose more than 8 percent in late trading after the
FACTORY SHIFT: While Taiwan produces most of the world’s AI servers, firms are under pressure to move manufacturing amid geopolitical tensions Lenovo Group Ltd (聯想) started building artificial intelligence (AI) servers in India’s south, the latest boon for the rapidly growing country’s push to become a high-tech powerhouse. The company yesterday said it has started making the large, powerful computers in Pondicherry, southeastern India, moving beyond products such as laptops and smartphones. The Chinese company would also build out its facilities in the Bangalore region, including a research lab with a focus on AI. Lenovo’s plans mark another win for Indian Prime Minister Narendra Modi, who tries to attract more technology investment into the country. While India’s tense relationship with China has suffered setbacks