Tue, Sep 26, 2017
A A A
Welcome Guest
Free Trial RSS
Get FREE trial access to our award winning publications
Industry Updates

SEB's China Financial Index reveals increased demand and higher profit expectations

Tuesday, March 05, 2013
Opalesque Industry Update - SEB's China Financial Index showed that China's economy bottomed out during the second half of 2012, and an increasing number of indicators now point to improved business conditions. Government-led stimulus packages, relatively loose monetary conditions and positive export figures have contributed to an improved business climate. Half of top managers at North European companies in China now have a positive view on the market and profit expectations in the region. After three consecutive surveys with falling sentiment, SEB's China Financial Index in March increases to 60.8 from 56.1 in September.

The percentage of surveyed companies that see lower customer demand as a main concern has fallen from 70 per cent to just above 40 per cent. Companies have increased expansion plans slightly in China, and two out of three respondents plan further investments. 15 per cent of companies plan significant investments, which is the same number as in September. A bit more than half of the companies plan further recruitment, which is higher than the last survey.

"Optimism among companies has increased since the last survey, and it is evident that order books are looking better than in September. Investment plans are also increasing albeit only marginally, as some manufacturing companies still have overcapacity in China and are awaiting more signs of a robust rebound in the economy. Furthermore, companies did not slow investment plans much last year, despite negative economic signals," says Fredrik Hähnel, Head of SEB in Shanghai and author of the report.

The Chinese economy grew by 7.9 per cent during the fourth quarter 2012 compared to 7.4 per cent for the third quarter. Several indicators in China now point in the direction of a modestly rebounding economy, and full-year growth for 2013 looks to be better than in 2012. During 2013, SEB economists expect China to grow by 8.1 per cent.

Increasingly positive signals in China make North European companies more optimistic about the future in the region. Around half of respondents now have a positive view of the coming six months, whereas the number of companies with a negative view has fallen from one-third to only ten per cent. The remaining forty per cent have a neutral view. Slightly less than half of the companies expect profits to increase, which is an increase from the last survey. Very few companies believe that profits will fall in the coming six months.

"Regardless of whether you believe the current Chinese growth model is sustainable or not, it is obvious that governernment stimulus for infrastructure and other projects at the end of last year is having a positive effect on business conditions for industrial companies. Meanwhile, private consumption should increase in China for many years to come, which is why companies selling directly to Chinese consumers are generally more positive than industrial companies," says Hähnel.

44 per cent of respondents see lower customer demand as a main concern, which is down from 70 per cent in the last survey. 16 per cent view competition as their largest concern. Other important issues are a complex regulatory system and lack of qualified staff.

"That fewer companies worry about a fall in customer demand further strengthens the picture that the order book is improving. It is also obvious from the survey that there is a shift towards more concern over increasing competition, as foreign investors see an increasing number of Chinese competitors moving up the value chain and taking market share," says Hähnel.

Half of respondents believe that the renminbi will strenthen against the US dollar. Seven out of ten companies anticipate higher interest rates. One-third of the companies also expect salaries to increase by 7-8 per cent in 2013 while four out of ten companies calculate with a salary increase of 9-10 per cent or more - a rate well above the 2 per cent annual inflation level in China in January.

"The competition for competence is fierce, and employees are still faster-moving when it comes to recruitment compared to most developed markets," says Hähnel.

Press release

bc

What do you think?

   Use "anonymous" as my name    |   Alert me via email on new comments   |   
Today's Exclusives Today's Other Voices More Exclusives
Previous Opalesque Exclusives                                  
More Other Voices
Previous Other Voices                                               
Access Alternative Market Briefing

 



  • Top Forwarded
  • Top Tracked
  • Top Searched
  1. iCapital Network enters deal to acquire innovative U.S. private equity access fund platform from Deutsche Bank[more]

    Komfie Manalo, Opalesque Asia: Financial technology platform iCapital Network has entered into a definitive purchase agreement to acquire the US Private Equi

  2. Neuberger Berman closes $1.1bn Credit Opportunities Fund[more]

    Neuberger Berman, a private, independent, employee-owned investment manager, announced that NB Private Equity Credit Opportunities Fund LP closed on $1.1 billion of limited partner commitments. The Fund seeks to invest in the secured and unsecured debt of private equity-backed companies, primarily i

  3. Capital Dynamics launches mid-market private credit business[more]

    Capital Dynamics, a global private asset manager, has launched a dedicated Private Credit Asset Management business. Experienced industry executives Jens Ernberg and Thomas Hall have joined Capital Dynamics to co-lead the company's new private credit initiative. They are based in Capital Dynamics' N

  4. Artificial intelligence may replace 40% of all jobs: Bridgewater founder Ray Dalio[more]

    From Foxbusiness.com: Bridgewater Associates founder Ray Dalio said Friday that almost half of the jobs in the next two decades will be replaced by artificial intelligence. "By in large, the world is going to largely consist of people who can take language and put it into code, which then allo

  5. Opalesque Exclusive: US investment firms must have tailored cybersecurity policies and procedures in place[more]

    Benedicte Gravrand, Opalesque Geneva: Cyber attacks are on the increase. One of the last victims was Equifax, a US credit scoring agency. As a result of its insufficient cybersecurity program, the agency was slapped with state and federal investigations, private lawsuits and a summons for chief e