Overall current business sentiment for the five ASEAN countries included in the survey improved 1.7 points in October. Individual indices improved for all countries over the previous month with the exceptions of Thailand and Malaysia. Depressed sentiment in Thailand reflected uncertainty regarding business prospects caused by political changes in September; in Malaysia, the electric/electronics equipment sector suffered weak performance. The index for the Thai transportation equipment sector fell to negative territory for the first time in five years. In contrast, the index for the transportation equipment sector in Indonesia improved 48.9 points, owing to an expected recovery in domestic demand for transport equipment, including motorcycles.
Overall forward business sentiment for the ASEAN region declined 2.5 points in this month's survey. The index for Indonesia, which had been on a downward trend since November 2005, improved a dramatic 20.8 points in October due to an expected recovery in domestic demand for transport equipment, and improving construction and real estate sectors.
Overall current business sentiment for China and North Asia continued solid, improving 1.7 points over the previous month in October (now at 10). By location, the index for Taiwan fell 8.1 points (now at -24.0). Indices for all Taiwanese sectors fell, with the greatest decline found in the transport equipment sector. At -15.8, the Korean index remained in negative territory, weighed down by the country's stagnant economy. The index for South China, where the index remained in negative territory in the previous month, improved 2.8 points (now at 13.9). Overall current sentiment for mainland China improved 7.5 points, and remains buoyant (now at 26.6).
Overall forward business sentiment for China and North Asia declined 5.7 points in this month's survey. Forward indices for mainland China continued strong, while that of Taiwan (at -16.0) and the ROK (at -13.2) remained stagnant.
A total of 725 replies were received in ASEAN countries (130 in Indonesia, 97 in Malaysia, 180 in the Philippines, 208 in Singapore and 110 in Thailand); 203 in China (40 in the North, 48 in the Northeast, 79 in the East and 36 in the South); 130 in Hong Kong; 38 in the ROK and 100 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, not by industry, and no breakdown is given for Northeast China due to the small numbers of companies surveyed in the region.
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," "the same" or "worse", in comparison to the previous year. The diffusion index is the difference between the ratio of positive ("better") and negative ("worse") responses.
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Current Business Sentiment
Business sentiment in October among Japanese companies operating in Asia showed the effects on ASEAN of softening oil prices in combination with easing inflation and lower interest rates. The result was improving business sentiment in Indonesia and other areas, and a somewhat improved business situation in ASEAN as a whole. In China and North Asia, the outlook in Taiwan and the Republic of Korea showed a conspicuously negative condition, continued from the previous month, but China is continuing to hold steady.
ASEAN 5
The October DIs rose 1.7 points for ASEAN as a whole (from -5.7 in September to -4.0 in October). Looking at the DIs by country, we see that the outlook was unclear in Thailand (from -9.7 in September to -11.8 in October) and declined in Malaysia (from -10.0 in September to -17.5 in October), where overseas demand related to electric and electronic machinery slumped. The other three countries rose over the previous month. The DI for transportation machinery in Thailand fell into the negative range (from 6.2 in September to -6.3 in October) for the first time in approximately five years, but in Indonesia, by contrast, the motorcycle market showed a recovery that resulted in the significant rise of 48.9 points in transportation machinery (from -57.2 in September to -8.3 in October).
The DI outlook for two or three months ahead was lower than October for ASEAN as a whole, with a decline of 2.5 points (from -4.0 in October to -6.5). Situated in this same context, Indonesia had showed a deteriorating trend since November 2005, and business had remained slack. However, there are prospects for recovery of the transportation machinery market, and construction and real estate market conditions are improving, resulting in a notable improvement of 20.8 points over October (from -29.2 in October to -8.4).
China and North Asia
The October DIs showed a rise of 1.7 points over the previous month for China and North Asia as a whole, at 10.0. The DIs are continuing to maintain a steady level (from 8.3 in September to 10.0 in October). Looking by region, we see that Taiwan showed negative figures in every industrial category, led by transportation machinery (-72.7), for a decline by 8.1 points to -24.0. Sluggishness in the economy continued in the Republic of Korea, which remained in the negative range at -15.8. Meanwhile, China maintained favorable levels in all regions, led by East China, with figures for China as a whole rising by 7.5 points over the previous month to 26.6.
Although the outlook DIs for two to three months ahead show China continuing to hold steady, business sentiment continues to remain sluggish in Taiwan (-16.0) and the Republic of Korea (-13.2). As a result, the figures for China and North Asia as a whole declined by 5.7 points (from 10.0 in October to 4.3).
