Concern over a U.S. interest rate hike kept sentiment in check at some of Asia’s biggest firms, as optimism about the outlook for business over the next six months was near steady in the first quarter, a Thomson Reuters/INSEAD survey showed. The Thomson Reuters/INSEAD Asian Business Sentiment Index RACSI was 71 for the March quarter versus 72 three months earlier. A reading above 50 indicates an overall positive view.
Companies in India were the most upbeat for the fourth straight quarter, logging 97 on hopes that low inflation and aggressive interest rate cuts will boost the domestic economy. Singapore firms registered the least positive outlook for the third consecutive quarter in anticipation of the first U.S. rate hike in almost a decade, which could happen as early as June. Local banks are likely to match the hike, making mortgages expensive and pulling down demand for property.
“There is significant risk as people may have different interpretations of movements in interest rates in a way that can cause dramatic changes in financial markets,” said Antonio Fatas, a Singapore-based economics professor at INSEAD. China’s reading rose to 54 from 50, as businesses became more optimistic about their future amid central bank efforts to moderate the economic slowdown with looser monetary policy, including successive interest rate cuts since late last year.