Urgent Need to Reinvigorate Asian Firms

A prime scrutiny stated that Asian companies, showed a decline up to $198.7 billion in their capital expenditures within the first quarter of the year emanating in decreased earnings, jobs and overall demand. Tensions from the U.S.-China trade war, the risk of disrupted supply chains and waning demand have purged spending this year. The fall in capital expenditure (capex) alluded that the weak global growth momentum could persist until there's a gradual recovery in confidence.

Tencent Holdings Ltd, Samsung Electronics, Hangzhou Hikvision Digital Technology Co Ltd and MediaTek Inc were among the Asian firms that cut their capex by more than 25% in the quarter from a year earlier, the data showed. This implies that these companies need to recalibrate their plans. A Reuters analysis of Refinitiv data showed that gross profits of about 1,300 top Asian firms likely fell for the third consecutive quarter in April-June.

While Asian central banks have started to reduce their interest rates, resonating with the Federal Reserve, some analysts are equivocal if this will help restore corporate spending in the region. "Although relocation of supply chains will form part of new capital expenditure, corporates will be more conservative in expansion," said Natixis's Garcia Herrero, adding that falling interest rates will reduce debt burdens "but does not necessarily mean that corporates will invest.”

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