Investors least bullish for years, says AT Kearney

The 2017 AT Kearney Foreign Direct Investment Confidence Index, released on April 18, has shown the least bullish sentiment observed in a number of years.

“What we see in these results is a growing realisation that we are going to have more muted and modest economic growth,” said Paul A. Laudicina, AT Kearney global business policy council chairman. “It’s a 50-50 mix of bulls and bears. Investors know they cannot forever invest on enhanced dividends and share buy-backs. They have to invest in growth opportunities.”

Consequently, the index indicates that 80% of investors believe FDI is going to drive profitability and competitiveness going forward.

“We think this is one of the paradoxes of the current global condition,” Mr Laudicina said. “We see a period of slow globalisation and flat global trade, but significant interest in FDI. Investors understand that they have to position themselves in markets to have access to those markets.”

On the rebound

Based on this year’s Confidence Index, AT Kearney predicts that the rebound in FDI will continue. “Seventy-one per cent of the executives we surveyed said that they plan to increase FDI, which is consistent across all regions and sectors that are contributing to FDI,” Mr Laudicina said. “We see particular commitments coming from Asia, as well as those in the IT sector.”

The US topped the index’s rankings, holding first place for the fifth consecutive year. The reason was its large market and business-friendly environment, even amid the uncertainty associated with US president Donald Trump’s policy proposals.

Germany enjoyed its highest ranking in the history of the index, likely reflecting its business-friendly regulatory environment and improving economic prospects, and possibly some heightened interest because of Brexit.

China continued its run among the top three since the index’s inception, with investors likely motivated by a stabilising economy and government plans to cut substantial red tape surrounding foreign investment. But Mr Laudicina warned that investor expectations regarding China’s economy turned decidedly negative this year. “Executives say they will reduce their FDI into China if market volatility increases,” he said.

Other rankings placed the UK fourth, immediately followed by Canada, Japan, France, India, Australia, and Singapore.