Asia firms’ confidence hits near two-year high on US, China pick-up

Beijing (Reuters): Business sentiment at Asia’s top companies rose to its highest in almost two years in the first quarter of 2017, buoyed by positive economic signs from the United States and China that underpinned improved global demand, a Thomson Reuters/INSEAD survey showed.

The Thomson Reuters/INSEAD Asian Business Sentiment Index, representing the six-month outlook of 96 firms, rebounded to 70 for January-March from 63 three months prior. A reading over 50 indicates a positive view.

During the quarter, the United States and China - two top destinations for Asian exporters - reported a slew of upbeat economic data that was far better than market expectations.

“Optimism about the U.S. economy, lack of immediate crisis in China, lack of bad news in Europe ... have reduced some of the immediate risks,” said Singapore-based economics professor Antonio Fatas at global business school INSEAD.

Sentiment in export-oriented Malaysia rebounded the most, with its subindex jumping 20 points to a three-year high of 75, as most respondents reported an increase in business volume and a third said staffing had risen in the past three months. Sentiment also surged in the Philippines by 18 points, with a subindex of 88 making the country the most optimistic in Asia.

In other export-driven Asian countries too, such as Taiwan, Singapore and Thailand, corporate sentiment improved significantly, while China and India recorded a slight decline from the previous quarter.

“Stronger-than-expected export numbers have provided quite a relief for those economies, at least more than they have for China or India which are more domestically oriented,” said Santitarn Sathirathai, head of emerging Asia economics at Credit Suisse in Singapore.

But for Chinese companies such as beauty app Meitu, strong domestic appetite for new services and goods in the country also points to a brighter business outlook that will see user traffic translate into profit.

“The fact that Chinese consumers are demanding upgraded products and services for beauty and entertainment is the basis of our confidence in business outlook in the next six months,” a spokesman said.

While the United States remains a powerful player in Asia, Asian economies have stepped up trade with China, whose growing presence was highlighted after the U.S. withdrawal earlier this year by President Donald Trump from the 12-nation Trans Pacific Partnership.

Fearing trade retaliation by China over the deployment of a new missile system, on top of a political crisis that led to the ouster of President Park Geun-hye, South Korean firms’ business sentiment - the weakest of 11 economies polled - tumbled 32 points to a subindex of 25, the lowest in almost five years.