THE contraction in the capital expenditure of
the energy and mining sectors is seen to drag down capex growth in the
Asia-Pacific region, according to a recent report published by global credit
ratings and research agency Standard and Poor’s (S&P).
According
to the Global Corporate Capital Expenditure Survey 2014, a report issued by
S&P, the contraction in energy and mining capex will even offset the
positive impact of a rebound in the information technology and
telecommunications sector corporate spending. It also reflects an “emerging
market capex fatigue”, which is not exclusive in Asia-Pacific but in other
regions as well.
“Even
in China, the global investment powerhouse, key corporates – who rank highly in
the global capex league table – appear to be transitioning to slower rates of
investment. To the extent that this is indicative of a wider move away from
investment-led growth in that country, it is potentially of huge significance
for the global economy,” the report said.
Indeed,
the S&P report revealed that despite healthy corporate balance sheets,
global capex spend fell by one per cent in real terms in 2013.
Current
estimates suggest a similar decline is likely in 2014, with global capex likely
to remain within the US$3.3 trillion mark for the third consecutive year.
Gareth
Williams, corporate sector economist at S&P in London said that the global
capex remained stuck in neutral, with declining commodity and emerging market
capex overshadowing a modest turnover in developed markets.
“A recovery
in capex remains one of the most keenly anticipated trends in the global
economy,” said Williams.
The
report said the significance of the pressure on energy and materials capex
cannot be overstated given that these industries together accounted for 42 per
cent of global corporate capex in 2013.
“Aggressive
cuts to capex are already being made by metals and mining companies, while the
larger oil and gas sector account growing evidence of stalling capex,” the
report said.
Other
sectors, especially in the IT, healthcare and telecommunication sectors, will
need to take the lead in order to have healthy capex growth.
The
report also said that Japan’s corporate capex is expected to bounce back.
S&P
estimates that Japan’s capex to rise by two per cent in real terms in 2014
after a four per cent fall last year.
Capital
expenditure growth in North America has faltered since the energy-led growth of
2011 and 2012. This has led to a continued rise in North America’s share of
global capex.
European
capex growth has been modest but surprisingly resilient competing with other
regions over the last year,stabilising the decline in the region’s share of
global capex.
Analisa
Amu
Business & Investment Opportunities
Saigon Business Corporation Pte Ltd (SBC) is incorporated
in Singapore since 1994.
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