Asia DataView: Chinese and Indonesians confident even as ratings diverge
China and Indonesia see different ratings actions but household sentiment aligns
In the past month, Moody's has lowered its credit rating for China, and Standard & Poor's has raised its rating for Indonesia.
Yet while the credit profiles of two of Asia's biggest economies are diverging, economic sentiment among consumers in the two countries may be increasingly aligned - for better or for worse.
The latest data from FT Confidential Research found economic sentiment among Indonesian households recovering in the first quarter after being hit by a slump in commodity prices, while our reading for Chinese economic sentiment rose to a record high in May.
Households in both countries have been bolstered by the Chinese government's resort to stimulus at the start of 2016. The measures helped fuel a housing market boom across China and lift commodities prices and exports from Indonesia.
In January-April, Indonesia's exports rose 18.6 per cent year on year in dollar terms, including a 61 per cent increase in non-oil and gas exports to China.
Ironically, the Moody's downgrade, which left China six rungs above the line dividing investment grade from junk, has come just as the Chinese government begins to show some of the responsible approach to economic management that earned Indonesia its upgrade, to the lowest rung of investment grade.
Beijing's recent tightening measures reflect a government acknowledgment that debt-fuelled growth is unsustainable.
There are now signs of a slowdown in China and the knock-on impact on commodities prices means that the current strength of economic sentiment in both countries may prove unsustainable. Confidence among Chinese and Indonesians about their economies may unfortunately remain aligned on the way down.
- Ben Heubl, Data Visualisation Analyst, FT Confidential Research
This article was first published on June 6 by FT Confidential Research.
FT Confidential Research is an independent research service from the Financial Times, providing in-depth analysis of and statistical insight into China and Southeast Asia. A team of researchers in these key markets combine findings from proprietary surveys with on-the-ground research to provide predictive analysis for investors.