Thomson Reuters/INSEADAsian Business Sentiment Survey

• Sentiment index 74 in Q2 vs 79 in Q1• First drop since September 2017• Companies cite mounting trade friction as chief risk• Retail & leisure sector most positive

CHINA/JAPAN/INDIA/AUSTRALIA/SOUTH KOREA/INDONESIA/TAIWAN/THAILAND/MALAYSIA/SINGAPORE/PHILIPPINES

Q22 0 1 8

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Thomson Reuters/INSEAD Asian Business Sentiment Survey JUNE 2018

BY LIZ LEE

usiness confidence among Asian companies slipped for the first time in three quarters, on mount-

ing worries that U.S. President Donald Trump’s protectionist policies would trig-ger tit-for-tat reprisals and undermine the global trading system.

The Thomson Reuters/INSEAD Asian Business Sentiment Index, representing a six-month outlook from 61 firms, fell to 74 in the second quarter from a seven-year high of 79 in the prior three months. The survey was conducted over June 1-15.

While a reading above 50 indicates a positive outlook, this is the first time the number has dropped since September 2017.

The risks to growth are increasingly real now, said Antonio Fatas, a Singapore-based economics professor at global busi-ness school INSEAD. “Trade war is not a risk but a reality,” he said.

“U.S. tariffs are going up against China but also against some of its traditional allies, such as Canada and the European Union. They are all about to retaliate and today we do not see an easy way out,” Fatas said.

Trump has riled key allies with his protectionist policies, including the

imposition of steel and aluminium tar-iffs on the European Union, Canada and Mexico. On Monday, he threatened to hit China with new tariffs on $200 bil-lion in goods.

“Companies can try to go around tariffs by moving production to other countries, this is costly and inefficient. It is a short-term solution but not optimal,” Fatas said.

However, Malaysia-based RHB Banking Group’s chief economist Arup Raha noted that some Asian economies, with strong external balance sheets, are relatively resilient to global turmoil.

“Besides, global growth, especially in

Asia business sentiment slips from 7-year high on trade worries

Vehicles pass a shopping arcade at Haiyue Garden in Shenzhen, China, Nov. 30, 2017. REUTERS/STAFF

B

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Thomson Reuters/INSEAD Asian Business Sentiment Survey JUNE 2018

the U.S. and China, is still good. Also, wage growth in Asia is signalling domestic strength,” Raha added.

China’s GDP has expanded at a steady 6.8 percent for three straight quarters, though there are concerns overly rapid credit growth and trade frictions could pose risks for the world’s second-largest economy.

By industry, retail and leisure was the most bullish, while construction and en-gineering as well as autos were the weak-est. Most sectors expressed concern about trade tensions and higher interest rates, the survey showed.

Respondents to the survey include Oil Search, Hero MotorCorp, Mahindra & Mahindra, Suzuki Motor, Asahi Group, SoftBank Group, Metropolitan Bank & Trust, SM Investments, Ayala Corp, Delta Electronics and Intouch Holdings.

Note: Companies surveyed can change from quarter to quarter.

Biggest perceived risksto business outlook By number of responses

Note: TPoll conducted June 1-15, 2018.

otal no. of valid responses = 54.

10

16 Others*

Worries of global trade war

Higher interest rates

9

12

7

Rising oil/commodity prices

Foreign exchange fluctuation

Source: Thomson Reuters/INSEAD

*Includes government policy, competition, etc.

Business sentiment index

Source: Thomson Reuters/INSEAD *MSCI International All Country Asia Pacific Price Index USD monthly

Thomson Reuters/INSEAD Asian Business Sentiment Index MSCI Asia-Pacific*

2017 2018’11 2012 2013 2014 2015 201650

60

70

80

90

100

100

115

130

145

160

175

Oil pumpjacks are seen near Aneth, Utah, U.S., Oct. 29, 2017. REUTERS/ANDREW CULLEN

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Thomson Reuters/INSEAD Asian Business Sentiment Survey JUNE 2018

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the U.S.-North Korea summit and the yen’s

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