Boardroom Confidence Grows As Economies Improve

Bruised faith in the global economy is improving as executives across the world report more confidence in their boardrooms, according to a new study.

Companies based in developed markets also have stronger balance sheets and are delivering higher returns, says the Fidelity 2015 Global Analyst Survey.

The highest hopes come from healthcare companies, while the energy sector displays the worst.

An almost unanimous feeling around the world is that companies expect to increase dividends.

The survey also highlights Japan as one of the brightest markets after decades mired in financial disappointment.

The report was compiled from more than 17,000 face-to-face interviews with executives and financial analysts.

Companies reinvigorated

Fidelity believes executives are more positive than they were a year ago in Japan, the US and Europe.

The research cites economic reforms introduced by the Japanese government, dubbed Abenomics, appear to be pulling the country out of recession and are improving growth.

“In general, lower oil prices, a cheaper and more stable euro and falling inflation in many countries seem to be reinvigorating many companies,” said Henk-Jan Rikkerink, head of equity research at Fidelity Worldwide Investment.

Meanwhile Craig Botham, emerging markets economist at Schroders, considers whether changing global markets will help export prospects for emerging economies.

Growth for man emerging markets suffered as the result of demand falling for their goods during the global downturn.

Emerging market problems

Botham argues that although economies have improved in developed markets, no such improvement has followed in exports from emerging markets.

“Commodity prices seem to be the problem,” said Botham. “Emerging market countries have a good supply but no one seems to want to buy. Oil is a good example; emerging market importers have shown more resilience than exporters.”

He cites a stronger US dollar as one factor influencing oil prices.

“While emerging markets should have seen their exports become cheaper as the dollar strengthened and their currencies devalued, we have not seen their competitiveness improve because other currencies, like the euro are also losing value and cancelling out the depreciation advantage,” he said.

As the US, Europe and Japan are the major target markets for exporters, weakening metal and oil prices do not seem to hold out much hope for improving emerging market balance of payments.

“Hopefully, we will see a boost for manufactured goods as these developed economies improve and people and businesses have more money to spend,” he said.

Leave a Comment