Chinese entrepreneurs’ pessimism stands out as Fidelity survey points to a gloomy 2019
- Weaker consumer sentiment and increasing costs of doing business are the core drivers of this year’s pessimism, says Michael Sayers, equities research director at Fidelity
- Fidelity’s sentiment index in China at -0.4 compared to 0.6 for rest of the world
Worldwide corporate sentiment has dropped the most since 2014 in Fidelity International’s survey, with pessimism among China’s entrepreneurs the stand-out feature in a year where prospects have been blighted by a trade war and a slowing economy.
The index dropped to 0.6 in 2019, based on the investment manager’s survey of 165 analysts after some 16,000 meetings with respondents. Sentiment fell to -0.4 in China, the sole geographic region to register a negative figure among corporate executives.
The Fidelity survey, which began in 2014, aggregates management confidence, capital expenditure, dividend policy, return on capital and balance sheets. Neutrality is set at 0, with a positive score indicating buoyant sentiment and a negative score signifying pessimism.
“This year’s pessimism has two core drivers, a weaker consumer and increasing costs of doing business; both of which threaten to squeeze profit margins in 2019,” said Michael Sayers, equities research director at Fidelity. “While we do not see a full-blown recession in the next six to 12 months, it is clear we have taken another step towards the end of the [expansion] cycle that started a decade ago.”
The US-China trade war was the main issue weighing on China’s corporate managers as manufacturing and exports remain a key component of the economy. Fidelity also cited the uncertainty Chinese consumers may feel about wage growth as having a negative effect on overall consumption.
