APAC suffers sharpest drop in business confidence: ACCA survey

By Digital News Asia August 21, 2015

48% of APAC finance professionals less confident, vs global average of 31%
Businesses negatively impacted by drop in demand as Chinese growth slowed

APAC suffers sharpest drop in business confidence: ACCA survey

THE Asia Pacific region experienced the sharpest drop in business confidence anywhere in the world in the second quarter of 2015, according to the latest global survey of finance professionals.

Businesses in the region were negatively impacted by a drop in demand as Chinese growth continued to slow, according to finance professionals responding to the Global Economic Conditions Survey organised by ACCA (the Association of Chartered Certified Accountants and IMA (the Institute of Management Accountants).

About 48% of finance professionals surveyed in Asia Pacific said they were less confident, compared with the global average of 31%.

“Slowing demand from China for construction materials has not only hit commodity producers in the region, such as Australia, Indonesia and Malaysia, but also the services-heavy economies of Singapore and some Australian cities,” said ACCA Asia Pacific director Leong Soo Yee.

Following weak economic data from China in the first quarter, nearly two-thirds of firms in the region reported that there were now fewer profitable opportunities to exploit, the ACCA said in a statement.

The outlook in the medium term is less gloomy than the survey suggests. China’s central and provincial governments are willing to take drastic measures to ensure that the economy does not experience a hard landing, and stimulus measures from earlier in the year have already resulted in strong fixed asset investment growth during the second quarter, it said.

China’s regional trading partners, for their part, have taken measures to blunt the effect of a Chinese slowdown.

Australia’s central bank cut rates in February and again in May, sinking the value of the dollar and thereby helping exports of items still in high demand from China, such as meat and wine, the ACCA said.

Asean’s emerging economies, such as Malaysia and the Philippines, have become more balanced in recent years with the rise of domestic middle classes helping to drive growth, it said.

Although reduced oil revenues will dent Malaysia’s prospects, the manufacturing sector – which contributes around a quarter of GDP (gross domestic product) – will benefit from cheaper oil, while the tourism industry stands to benefit from the recovery in advanced Western economies and ongoing growth in Chinese visitors to South-East Asia, the ACCA said.

Meanwhile, the global economy faces a period of volatility and major readjustments, according to the survey.

The second quarter of 2015 saw an abortive rise in oil prices, several expected and unexpected rate cuts by central banks, a rebound in Western consumer sentiment and a stock market crash in China.

These events led to business confidence levelling off in the second quarter of 2015 following six months of improvement.

The Global Economic Conditions Survey (GECS), carried out jointly by ACCA and IMA, is the largest regular economic survey of accountants in the world, in terms of both the number of respondents and the range of economic variables it monitors, the ACCA claimed.

Its main indices are good predictors of GDP growth in the OECD countries and daily trend deviations correlate well with the VIX or ‘fear’ index, which measures expected stock price volatility.

Fieldwork for the Q2 2015 GECS took place between May 29 and June 16 2015 and attracted over 950 responses from ACCA and IMA members around the world, including over 100 CFOs (chief financial officers).

Nearly half the respondents were from small and medium enterprises, with the rest working for large firms of over 250 employees.