By Gaurav Dogra and Patturaja Murugaboopathy
(Reuters) - Asian companies will slow investment sharply this year, deterred by soaring interest rates and fears of deepening recession, and budgets will on average fall next year, the first contraction since 2015, data showed.
Capital spending at large and mid-cap Asian companies is expected to grow 6.4% in 2022 and slip 0.7% in 2023, compared with a 13% rise last year, according to Refinitiv data.
GRAPHIC: Capex change at Asian companies https://fingfx.thomsonreuters.com/gfx/mkt/mypmnllngvr/Y-O-Y%20change%20in%20Asian%20companies'%20capital%20expenditures.jpg
Companies globally are grappling with rising costs of raw material, labour and logistics as China's COVID-19 related lockdowns have further strained supply chains and the Ukraine war has pushed up energy prices. Businesses have sounded caution over slowing consumer demand.
Some sectors are expected to cut spending more aggressively.
Capital expenditure (capex) for Asian autos and their component suppliers is expected to plunge 16.5% this year although it may rise 2.1% in the next.
The region's tech firms, which will still spend 8% more than they did last year to catch the last of the demand generated by the pandemic, are expected to cut spending by 3% next year.
Spending by consumer discretionary firms is expected to fall 7.8% in 2022 and rise 3.3% in 2023.
GRAPHIC: Capex change by industry https://fingfx.thomsonreuters.com/gfx/mkt/gkplgyygdvb/Breakdown%20by%20sector%20for%20y-o-y%20change%20in%20capex.jpg
"There are increases in parts of Asia tech hardware - especially mature foundries - and capex is high for utilities or manufacturing firms that invest in changing their businesses," said Herald van der Linde (NYSE:LIN), head of HSBC's Asia Pacific equity strategy.
Utilities and industrial firms are expected to boost capex this year by 18% and 17% respectively.
Budget cuts will also vary by country, with data showing Malaysia and China making the deepest cuts at 12.1% and 4.68% respectively.
GRAPHIC: Capex change by country https://fingfx.thomsonreuters.com/gfx/mkt/mopanaanqva/Breakdown%20by%20country%20for%20y-o-y%20changes%20in%20capex.jpg