JETRO polls the companies to measure year-on-year changes, expressed as diffusion indices, in their business outlooks for the current month and the next two to three months going forward.
Overall current business sentiment for the five ASEAN countries included in the survey showed little improvement, with the index gaining just 0.2 points over the previous month to stand at -6.1. This reflects continued slow overseas demand for electric/electronic equipment. By country, current indices for all locations (with the exception of Singapore and the Philippines) remained depressed in this month's survey.
Overall forward business sentiment for the ASEAN region rose 4.1 points in March (now at -2.0), owing to improved indices in Malaysia (now at -11.1) and the Philippines (now at 0.0).
The index for Thailand sank below last month's already record low, due mainly to stagnant domestic demand for transport equipment such as automobiles and worsened performance in construction and real estate sectors, as housing demand fell off, this latest survey revealed.
Overall current business sentiment for China and North Asia fell into a negative territory in March, with the index declining 2.8 points over the previous month to stand at -0.3. By country, the index for mainland China remained strong at 11.6, although continuing on the downward trend that began in October 2006. The index for the country's electric/electronic equipment sector remained depressed (now at -3.6), reflecting decreasing overseas demand; the index for the electric/electronic sector in Southern China declined 39.9 points to -25.0. Overall, indices for Taiwan and ROK in these sectors remained depressed, standing at -27.4 and -16.7 respectively.
Overall forward business sentiment for China and North Asia remained unchanged in March (holding tight at -0.3), reflecting continued depressed sentiment in Taiwan and ROK, where indices stand at -17.9 and -16.7 respectively. Declining sentiment was also recorded for mainland China, where the index slipped 4.9 points to 6.7 in March.
Southern China, where there are a number of export companies, saw worsened sentiment in this latest survey, due mainly to weak demand for IT products such as personal computers and LDC monitors (companies adjusted inventory levels to match the slower demand). Sentiment in the region, however, is expected to recover by May.
A supplemental question was included in the March survey asking about the negative impact (if any) of strong local currency (against the US dollar) on business sentiment for the current month and the next two to three months going forward. Overall, 44.7% of respondents view negative impact on current sentiment, while 49.9% expect negative impact in the next two to three months. By country and region, the Philippines (62.7%) ranked highest in the ASEAN region and Northeast China (65.9%) topped the China and North Asia region for companies viewing effects on current sentiment; the Philippines (64.9%) and Northeast China (70.7%) also had the highest percentage of respondents viewing negative impact on future sentiment.
A total of 681 replies were received in ASEAN countries (122 in Indonesia, 90 in Malaysia, 185 in the Philippines, 182 in Singapore and 102 in Thailand), 164 in China (30 in the North, 41 in the Northeast, 61 in the East and 32 in the South); 120 in Hong Kong; 30 in the ROK and 95 in Taiwan.
Current Business Sentiment
Business sentiment in March among Japanese companies operating in Asia remained sluggish, with no recovery apparent in ASEAN as a whole. The deterioration in the outlook has been particularly conspicuous in Thailand, where the DI figures reached their lowest point since the surveys began in June 2001. In China and North Asia, business sentiment among Japanese companies in China and Hong Kong generally held steady. The DI figures for China, however, have been on a gradual downward trend since reaching a peak in October last year. Taiwan and the Republic of Korea, for their part, continue to show no signs of recovery, leading the region as a whole to drop into the negative range.
ASEAN 5
Although the March DIs showed a 0.2 point rise over the previous month for ASEAN as a whole, there was a slump in overseas demand for electric and electronic machinery. Consequently, the figures showed no improvement (from -6.3 in February to -6.1 in March). Going by country, the DIs did show a rise over the previous month in Singapore and the Philippines, but elsewhere the figures were unfavorable.
The outlook DIs for two to three months ahead show improvements over the previous month in Malaysia (from -23.3 in March to -11.1) and the Philippines (from -7.6 in March to 0.0). The figures for ASEAN as a whole rose 4.1 points (from -6.1 in March to -2.0).
· Business Sentiment in Thailand Deteriorates Owing to Sluggish Automobile Sales and Other Domestic Demand and Slump in Construction Market
The overall DI for Japanese companies operating in Thailand in March fell from its lowest point ever, reached the previous month, to a still lower point (from -31.9 in February to -32.3 in March). Sluggishness in domestic demand for transportation machinery, such as in domestic sales of automobiles, was compounded by deteriorating figures for construction and real estate caused by the decline in housing demand.
China and North Asia
The March DIs for China and North Asia as a whole declined 2.8 points from the previous month to -0.3, turning down into the negative range.
Going by region, although the figures for China held steady at 11.6, the declining trend has continued for five consecutive months since the peak in October last year. There has been sluggishness in electric and electronic machinery in particular (from 20.7 in February to -3.6 in March) caused by slumping external demand. Electric and electronic machinery in the South China region declined 39.3 points over the previous month, to -25.0. The March DIs show continuing sluggishness in Taiwan, at -27.4, and the Republic of Korea, at -16.7, with neither showing any signs of recovery.
The outlook DIs for two to three months ahead show that China and North Asia as a whole remained flat by comparison with March (from -0.3 in March to -0.3). This was caused by the continuing sluggishness in Taiwan (to -17.9) and the Republic of Korea (to -16.7), combined with the tendency toward a slowdown in China, where the outlook DIs were at 6.7, a decline of 4.9 points from March.
· Overseas Demand for Electric and Electronic Machinery Sluggish in the South China Region
Business sentiment has deteriorated in the South China region, where export-oriented companies are particularly numerous, even for the electric and electronic machinery corporations. Background factors include a decline in supply and demand for personal computers, liquid crystal monitors, and other such IT products, causing a period of inventory adjustment. IT product supply and demand is expected to recover as soon as May, with the figures expected to improve following inventory adjustment.
An additional question was placed in the survey, asking whether there had been an impact on current business sentiment and the outlook (two to three months ahead) from the rise in the exchange value of local currencies against the dollar. Overall, the percentage of companies responding "Yes, we do" notice an impact from the exchange rate came to 44.7%, and 49.9% anticipated an impact.
Looking by country and region, the percentages of companies responding "Yes, we do" notice an impact and "Yes, we most likely will" notice an impact in two to three months were relatively high for the Philippines in ASEAN (62.7% responding "Yes, we do," and 64.9% "Yes, we most likely will"). Meanwhile, Northeast China showed the highest responses by region for China and North Asia, with 65.9% saying "Yes, we do," and 70.7% "Yes, we most likely will."
