Business confidence among senior Japanese company managers has overtaken confidence shown by managers in other regions over the past year, according to analysts at Fidelity Worldwide Investments.
Fifty per cent of Fidelity’s analysts surveyed by the firm after meetings with Japanese companies report higher confidence levels. This compares to one in three reporting higher confidence among managers at a global level.
Fidelity’s 2015 Global Analyst Survey finds 42% of analysts report higher confidence among European managers and 37% report higher levels in the US.
Overall, Japanese companies were more positive than other regions on every indicator measured in the survey. For example, in Japan around 80% of analysts found managers expected stable or increased capital investment compared to 74% in the US and 64% in Europe.
This gap widened when it came to the expectations of increasing returns on capital, with 75% of analysts reporting positively about expected returns in Japan compared to only 36% in Europe and 23% in the US.
Similarly, 70% of Fidelity’s analysts found balance sheets had strengthened, a figure which dropped to 67% in Europe and only half in the US.
Henk-Jan Rikkerink, head of equity research at Fidelity Worldwide Investment, says: “For the time being at least it seems the reforms initiated by Prime Minister Abe appear to be working. Japanese companies are giving the ‘Abenomics’ reform programme the benefit of the doubt, and the indicators show we will see impact on the real economy.”
He adds that modest optimism prevails in Europe because of improving company fundamentals, lower oil prices and a cheaper euro, while US conditions are expected to remain stable at healthy levels.
In emerging markets the outlook is less positive, with the Eastern Europe, the Middle East, Africa and Latin America showing the lowest regional sentiment rankings. Around 59% of the analysts said that management confidence has deteriorated significantly in the past year.
Half of the analysts in these areas also expect companies to cut back on capital expenditure over the coming year, particularly due to weakness in the energy sector as a result of the collapse in the price of oil.
The survey was conducted in January 2015 among 159 of Fidelity’s equity and fixed income analysts.
©2015 funds europe