26 February 2020

Asian businesses eye intra-regional expansion to combat headwinds

Stanley Hsiao

HSBC Taiwan’s Head of Commercial Banking

An uncertain trade outlook and geopolitical headwinds have created a contrast in Asian business sentiment, according to a new HSBC report. The research shows that businesses in Asia are forging ahead with an intra-regional expansion strategy to offset the muted outlook.

HSBC’s 2019 ‘Navigator: Now, next and how’ surveyed business leaders from over 9,100 companies across 35 markets globally to gauge business sentiment and growth prospects. More than 3,200 businesses in 12 Asian markets took part in the research.

Asian firms unite on intra-regional growth

Navigator reveals that 77% of companies in Asia are projecting growth in their businesses in the year ahead – broadly aligned to global peers at 79%. In Bangladesh, India and Indonesia, the sentiment climbs above 96%, while for businesses in Japan, South Korea and trading hubs like Singapore, confidence falls below the regional median.

Among the bulls, the most pronounced optimism is in Indonesia and Bangladesh, where half of companies surveyed are expecting sales growth of 15% or more – roughly two to three times the rate of GDP growth in those markets.

“Asia is renowned for its diverse economic landscape, but what we’re seeing now is that shifts in global trade policy are reshaping the contours of that landscape,” said Stuart Tait, Regional Head of Commercial Banking in Asia-Pacific for HSBC. “Businesses continue to internalise geopolitics and protectionism and are unified in their focus – intra-Asian expansion.”

Opportunities to come from liberalising trade

While export-oriented markets in Asia are feeling the drag of market uncertainty, on balance Asian businesses are laser-focused on expansion. Looking ahead to the next five years, 4 in 5 Asian businesses are projecting growth, with more than half (55%) planning to boost their intra-regional trade and business activity.

“Asian markets are also championing trade liberalisation, which continues to open up the region’s vibrant markets to  local businesses,” said Tait, citing renewed commitment to multilateral efforts such as ASEAN, the Comprehensive and Progressive Agreement for Trans-Pacific Partnership and the Regional Comprehensive Economic Partnership.

While many businesses are celebrating these regional growth opportunities, the minority that expect their business to shrink in the next 12 months cite  “increased competition” as the biggest factor driving their subdued outlook.

Tait concluded: “Where there is fast growth, there is also fierce competition. Nowhere is that more apparent than in Asia. Businesses globally also have their eyes on the Asian consumer and the region’s unrealised potential, and they’re aiming to capture this growth.”

“Businesses across Asia must raise their game if they wish to grow their market share in this thriving and competitive region,” he said.

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