Bangkok--18 Jan--Standard Chartered
Standard Chartered has released the conclusions of its inaugural corporate sentiment survey conducted by the Bank’s equity research team. Key conclusions focus on optimism amongst corporate in domestically-oriented economy, like that of Indonesia, India and Thailand.
This, the first of series of quarterly surveys, was based on the views of 529 C-Suite executives from 7 Asian markets; China, Hong Kong, Singapore, India, Korea, Indonesia, and Thailand, in 12 industry groups, 99% of whom are clients of Standard Chartered and business contacts of the equity research team.
Analysis of the responses to our survey highlights a number of conclusions, with specific implications for investors:
Domestic demand drives orders + CAPEX - Buoyant new orders are centered on economies that are more domestically oriented, including Indonesia, India, and Thailand. Hence, the CAPEX and hiring plans are biased towards these economies, whereas cyclical economies (with the exception of Korea) and sectors are less positive.
Expectations for new orders recorded the third highest positive response after hiring plans and wages according to the survey. New orders are expected to rise 10% by 69% of respondents, with markets focusing on domestic demand reporting the strongest expectations for new orders. A 10% rise in new orders is expected by 95% of the respondents in Indonesia, 80% in India and 65% in Thailand.
RMB as a settlement currency - The RMB is gaining traction as a settlement currency. On the sector basis, RMB is a settlement currency for 42 and 41% of the companies in the capital goods and tech hardware industries, respectively. This probably reflects the importance of China as a destination for heavy machinery exports, which gives buyers some leverage over suppliers in terms of reducing currency risk when it comes to buying machines. In the tech sector, it may reflect the influence of Taiwanese manufacturers on the sector, as we note that 50% of the respondents in Taiwan indicate they already use the RMB as a settlement currency.
Demand — the biggest challenge facing businesses — We questioned our respondents on the greatest challenge facing their business: 28% see demand as the greatest challenge. On a sector basis, software and material sectors with 57 and 58% of respondents citing it as their top concern.
Cost pressures followed as the second concern, at 25%. Regulatory uncertainty took the third spot, with 19% of the respondents indicating it is their biggest challenge. While there was a fair degree of consistency in terms of the responses across companies and sectors, regulation and cost pressure jumped out as the biggest challenge in China and Singapore respectively.