Asian business confidence has fallen to its lowest

Confidence among Asian companies in the June quarter fell to its lowest since the 2008-09 financial crisis, as the US-China trade war disrupts global supply chains and shows little sign of easing soon, said INSEAD recently.

The Thomson Reuters/INSEAD Asian Business Sentiment Index tracking companies' six-month outlook worsened in the three months ended June to 53, versus 63 in the previous two quarters, the business school noted.

A reading above 50 means optimistic respondents outnumbered pessimists, but worries about the threat of a prolonged trade war drove the index to its lowest since the June quarter of 2009, when the first edition of the survey was released, INSEAD explained.

The big dip isn’t about uncertainty anymore
"There was a big dip (in the index) three quarters ago, and we felt it was the uncertainty about the trade war and people were worried about the future," said Antonio Fatas, a Singapore-based economics professor at global business school INSEAD.

"We get a sense after four quarters of low numbers that now, it's not just uncertainty. This is a true slowdown in growth. We see activity declining — it's not just the expectation that activity will decline," he added.

For a fourth straight quarter, survey participants cited the global trade war as the chief risk to business, followed by Brexit and a slowdown in the Chinese economy, INSEAD observed.

The survey interviewed 95 companies in 11 Asia-Pacific countries that together contribute about a third of global gross domestic product and are home to 45% of the world's population. It was conducted from May 31 to June 14.

Respondents to the survey included Japan's Nikon Corp, South Korea's Samsung Electronics, India's Tata Consultancy Services and Reliance Industries Ltd, as well as Thailand's PTT PCL.

Rising caution
The index staying above the neutral point of 50 suggests companies in the region are not expecting an imminent global recession, but the decade low indicates caution was rising as trade tensions mount, the business school said.

China's economy has already felt the heat, with industrial output growth sliding to a 17-year low in May.

BNP Paribas doesn’t expect a resolution to the trade war this year, said Hong Kong-based Manishi Raychaudhuri, Asia-Pacific equity strategist at the banking group.

The trade tensions are hurting supply lines, especially that for higher-end smartphones, with many manufacturers looking to move production out of China and into countries such as Vietnam, Taiwan and Bangladesh, Raychaudhuri noted.