INTERNATIONAL. Asian businesses are less optimistic today than they were in the first quarter of 2012 as concerns about the global economy and anxiety over rising costs mount, according to a quarterly survey published jointly today by INSEAD and Thomson Reuters.

The Thomson Reuters/INSEAD Asia Business Sentiment Index <RACSI> fell to 69 from the 74 reading in the first quarter. A reading above 50 indicates an overall positive outlook.

“The biggest concern of business leaders in the Asia-Pacific countries is global economic uncertainty,” said Ilian Mihov, INSEAD’s Deputy Dean, Faculty & Research and Professor of Economics. “Still, from 74 to 69 is really only a marginal decline given all the uncertainty in the global economy, slowdown in China, the European and U.S. crises.”

Airlines and the food sector cited rising costs as their chief concern while other risks cited in the survey were foreign exchange volatility, regulatory changes, oil prices, government policy shifts, and in the case of Thailand, government instability.

The index surveyed sentiment at 177  top Asian companies in 11 countries between June 4-15, 2012, across a broad range of sectors including autos, financials, technology, resources and property.

Most and least positive countries

The Philippines was the most positive country with an index reading of 100 while Australia was the most negative with a reading of 42.

“If you look at the data, the Philippines is growing at 5 percent. However, in the first quarter, it grew very rapidly – at more than 10 percent on an annualised basis,” says Mihov. “The Philippine peso has also been appreciating over the last few years and inflation is relatively low and controlled.  So throughout the economy, it seems things are going in the right direction and that’s confirmed by this survey. The business confidence index says very, very strongly, ‘100 percent we think things are improving in the Philippines’.”

“In Australia, things are different and we hear about the two-speed economy,” Mihov adds. “The mining sector is going quite well but that generates a big issue for the manufacturing sector as the Australian dollar has become very expensive. As a result, the rest of the economy is suffering and that could be a drag on the economy, and that could be the reason for their pessimism.”

Outlook

The survey showed that employment levels appeared relatively stable with 104 companies saying they were the same, while 15 companies reported lower employment levels and 58 saying employment levels at their companies were rising. Ninety companies in the survey said new orders or sales had risen, while 71 reported the same level as in the previous quarter.

“The survey shows very clearly that businesses here are quite optimistic,” Mihov says. “The growth story is still happening in most of these countries, justified by data and not just a speculation of what might be happening. It appears that there are forces and dynamics in place driving up growth.”
 
Please refer to the full Asia Business Sentiment Survey for more information: http://link.reuters.com/fej88s

This article is republished courtesy of INSEAD Knowledge

Copyright INSEAD 2012

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