Overall current business sentiment for the five ASEAN countries included in the survey improved in January, with the index gaining 1.5 points and reaching into positive territory for the first time in 14 months (now at 1.0). Indonesia saw its index return to positive territory for the first time in 15 months (now at 4.6), owing to a continued recovery in domestic demand for electric/electronics equipment and transport equipment.
Overall forward business sentiment for the ASEAN region declined 3.8 points in this month's survey (now at –2.8), due to low expectations for increased demand in overseas markets. Weakened sentiment in Thailand, mainly in construction and real estate sectors, contrasted with an improved picture in Indonesia, where the index surged 8.6 points to reach 13.2, on the back of growing domestic demand for transport equipment such as motorcycles and automobile parts.
Overall current business sentiment for China and North Asia declined 3.2 points over the previous month in January (now at 1.3). By location, the index for Taiwan slipped to –31.7, mainly due to production/inventory adjustments among LCD panel makers, while the index for ROK remained in negative territory for the fifth straight month (now at -24.3). The index for mainland China, however, maintained its high level (now at 20.7) in this latest survey.
Overall forward business sentiment for China and North Asia remained in negative territory (-0.7) in January, reflecting declining sentiment in mainland China (where the index fell 8.7 points in January to 12.0) and continuing depressed economic sentiment in both Taiwan and ROK, where indices now stand at -24.7 and -29.7 respectively.
A total of 732 replies were received in ASEAN countries (129 in Indonesia, 86 in Malaysia, 186 in the Philippines, 215 in Singapore and 116 in Thailand), 183 in China (37 in the North, 45 in the Northeast, 66 in the East and 35 in the South); 125 in Hong Kong; 37 in the ROK and 101 in Taiwan.
JETRO, in cooperation with Japan's Ministry of Economy, Trade and Industry, has been conducting the survey in the first week of every month since June 2001 in the five major ASEAN countries, since June 2002 in South China, Hong Kong and Taiwan, since July 2002 in North and East China, and since October 2002 in the ROK and Northeast China. Results for the ROK are broken down into manufacturing and non-manufacturing only, but not by industry, and no breakdown is given for Northeast China, due to the small numbers of companies surveyed in these areas.
The aim of the survey is to provide up-to-date information on business conditions in the Asian economy to help companies develop more effective business strategies. Firms are asked to compare earnings prospects, supply and demand, inventory, sales prices and accounts receivable with the same period one year earlier. The current month and the following two to three months are evaluated separately in each question. Replies are limited to "better," "same" or "worse" than a year earlier. The diffusion index is the difference between the ratio of positive ("better") and negative ("worse") responses.
Current Business Sentiment
Business sentiment in January among Japanese companies operating in Asia continued the upward turn seen for ASEAN as a whole , amid favorable economic conditions in Indonesia and Singapore. In China and North Asia, business sentiment among Japanese companies in China and Hong Kong was favorable, but the DI figures in Taiwan and the Republic of Korea remain relatively low. As a result, business sentiment for China and North Asia as a whole showed a conspicuous decline.
ASEAN 5
The January DIs for ASEAN as a whole rose 1.5 points over the previous month, taking this figure from the negative range up into the positive range for this first time since November 2005 (-0.5 in December to 1.0 in January). Looking at the DIs by country, we see that the continuing recovery in domestic demand for transportation machinery and for electric and electronic machinery has brought Indonesia up into the positive range for the first time since October 2005 (-7.6 in December to 4.6 in January).
The outlook DIs for two to three months ahead show ASEAN as a whole declining by 3.8 points from January (from 1.0 in January to -2.8). Overseas supply and demand in electric and electronic machinery are expected to be sluggish in general, while construction and real estate are conspicuously sluggish in Thailand. Meanwhile, in Indonesia, an upward turn in transportation machinery, including automobiles and automobile parts, is expected to bring an improvement of 8.6 points over January (from 4.6 in January to 13.2).
China and North Asia
The January DIs for China and North Asia as a whole declined 3.2 points over the previous month, to 1.3 (4.5 in December to 1.3 in January). Looking by region, we find that the effects of production adjustments by LCD panel corporations in Taiwan, among other influences, have resulted in a continuation decline,to -31.7. Also The Republic of Korea was at -24.3, leaving it in the negative range for the fifth consecutive month. Meanwhile, China as a whole has maintained a high level at 20.7.
The outlook DIs for two to three months ahead were in the negative range for China and North Asia as a whole (from 1.3 in January to -0.7). This is due to the sluggishness of business sentiment in the Republic of Korea (to -29.7) and Taiwan (to -24.7), as well as the continuing tendency toward a slowdown in China, where the outlook DIs were at 12.0, a decline of 8.7 points from January.
