The trade war hits the profits of Southeast Asia for a first decline in 9 quarters

SINGAPORE – Profits of the largest companies in Southeast Asia fell for the first time in nine quarters, hit by the trade war between the United States and China and the fall of regional currencies.

Nikkei Asian Review calculations show that the profits of 95 companies in Indonesia, Malaysia, the Philippines, Singapore, Thailand and Vietnam fell by 1.5% for the period from July to September. The combined results of these Nikkei Asia300 companies fell to $ 14.4 billion compared to the same period of the previous year, based on the average exchange rates of the corresponding periods, according to QUICK-FactSet data. .

This compares with the figure for the April to June quarter of $ 14.8 billion, representing an increase of 14% over the same quarter in 2017.

Weak business results are in line with the slowdown in regional economies. Indonesia, Malaysia, the Philippines, Singapore and Thailand all reported slower economic growth between July and September compared with the previous year.

One of the main causes of this slowdown is the escalation of the trade war between the United States and China. Export-oriented firms were affected when the two largest countries in the world imposed mutual import duties on their imports in July, which were strengthened during the quarter.

The Thai conglomerate of building materials Siam Cement recorded a 20% drop in its net profit from one year to the next during the quarter from July to September in local currency.

"The persistent trade war has begun to bite our exports in the third quarter of this year," said President and CEO Roongrote Rangsiyopash, at a press conference announcing the results. "The US-China niche raises uncertainty about the import policy of our trading partners and the reduction of our exports."

Low currencies in emerging markets have affected the activities of several countries. Singapore Telecommunications, the largest mobile operator in Southeast Asia, with subsidiaries in emerging economies, including Indonesia and India, is among the victims.

Its net profit fell 77% in local currency in the quarter compared to a year ago. The Indonesian rupee and the Indian rupee were among those that weakened considerably against the dollar during the period.

The largest hospital chain in Asia, IHH Healthcare, a Malaysian company whose results announced Tuesday were not included in the survey, fell into the red with a net loss of 104 million ringgits ($ 24 million) . The IHH has a chain of hospitals in Turkey, where the local currency, the read, has depreciated against the dollar. The company attributed its poor performance in part to "greater foreign exchange losses on the subsidiary's unread loans".

Rising crude oil prices during the quarter hurt airline margins. Singapore Airlines and Garuda Indonesia reported a 81 percent and 95 percent drop in profits, respectively, while the Philippine budget company Cebu Air went into the red. Singapore Airlines Vice President of Finance, Stephen Barnes, said during a presentation on the results that "the impact of rising fuel costs [was] really come across. "

Singapore Airlines said the impact of higher crude oil prices was "really noticeable" after announcing an 81% drop in profits between July and September compared to a year ago.

© Reuters

Southeast Asian companies will have little respite in the coming months, with trade tensions between the US and China continuing and the US Federal Reserve continuing to raise interest rates.

Most Southeast Asian economies are trade dependent and are heavily integrated into the supply chains of Chinese and US manufacturers.In addition, emerging markets could see investors disengage with rising US rates.