Asian Corporate Investment Driven by Rising Reform Confidence

An Economist Corporate Network survey has revealed across-the-board rises in confidence in sales growth at the start of 2015, with Indonesia, China and India among the frontrunners

Business leaders across Asia Pacific believe the outlook for 2015 is brighter than last year, according to a survey of 700 big multinationals from the Economist Corporate Network (ECN).  

Some 54 percent of CEOs say their expectations for Asia have improved over the past year, while only 11 percent say they have deteriorated.

The Asia Business Outlook Survey, released every January by the ECN—the business advisory arm of The Economist Group—polls CEOs about their business performance, their expectations, and their investment intentions.

The 700 companies in the 2015 survey expect every part of Asia to deliver faster sales growth this year than last. In China, for example, average sales growth is expected to be 10.1 percent versus 9.6 percent in 2014. In South-east Asia, they forecast sales growth of 9.3 percent compared to 7.5 percent in 2014. And in Japan, the forecast is for 4.8 percent versus 3.8 percent last year.

“At the start of 2015, the outlook for the global economy is highly uncertain. Big questions hang over the direction of oil prices, the impact of the US recovery on Asian currencies, and whether the Eurozone will resort to quantitative easing.

“Within Asia itself, the prospects for Abenomics in Japan, for China’s rebalancing, and for India’s reform process are equally unclear. But despite this uncertainty, regional business heads are confident that the Asia Pacific region will deliver faster sales growth in 2015,” says Justin Wood, director of the ECN in South-east Asia.

Backed by rising confidence, the 700 companies are increasing their investment plans. The number one market for new investment this year will be China, with 71 percent of companies increasing their investment there. In second place is Indonesia, where 60 percent of companies are increasing investment, followed closely by India.

“It’s no surprise that Asia’s big three population centres are attracting the strongest attention. But the results also suggest a confidence in the reform initiatives underway in all three places,” says Wood.

Indeed, respondents were asked to gauge the likely impact of reform programmes in various Asian countries on their business performance over the next three years. The results show a strong sense that business conditions will improve.

The sentiment that reform will deliver positive, meaningful change was strongest in India, Indonesia and China.