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Recession Watch: Asia

Trawling through newspaper articles to discover whether particular topics are “trending” (as we say these days) is an old trick but an effective one for discovering what is on the public mind. Our scoutAsia news archive, with almost 2.5m articles in it (and over 1,000 new ones joining each day), is an ideal resource for this. And having just introduced Boolean search to our service makes the process much more accurate.

A word on that first. Boolean search is a type of search that allows users to combine keywords with operators such as AND (either type the word or use a + sign), NOT (represented by a – sign) and OR (which can be duplicated by a vertical bar: |). So a Boolean search for “recession” AND “Asia” would limit the search results to only those articles containing both keywords.

In addition, you can use quotation marks (“”) to search for an exact phrase, for example “economic gloom” and parenthesis () to combine modifiers to create a more complex search.

I have made use of this new function to see whether our news feeds (and hence policymakers, investors and analysts) are becoming more concerned about a recession in Asia.

My first search, to establish a simple baseline, was just to chart how often the word “recession” has been mentioned in all scoutAsia articles in each of the first months of 2019. As you can see from the first chart, those mentions were up and down during Q1 but have been rising steadily since May. That message is reinforced when comparing the total number of times “recession” was written about in 2018 (1,085) with an annualised figure for this year (1,737) – an increase of 60%.

I then added a Boolean search as follows: recession + Asia – (global|world)…to make sure the articles were talking specifically about an Asian recession rather than a worldwide one. As the second line on the chart shows, the number of mentions drops by two thirds or more but the pattern is the same. And comparing 2018 to an annualised 2019 suggests an even sharper increase of 71%. So while a recession in Asia appears much less likely than one in, say, the UK, Germany or the US, concern about one is rising rapidly.

I then ran a final search to capture talk of a “slowdown” and of “gloom” as well as an outright recession – and since these are rather general terms, I made sure that they were connected to the economy. And I still restricted myself to Asia. Hence the search input was: (slowdown|gloom|recession) + (economy|economic) + Asia – (global|world).

As you can see from the second chart (below), this greatly increases the number of relevant articles and, once again, the trend is upwards from April/May. It is worth noting that the high January figure is probably distorted by a number of pieces that attempt to predict trends for the entire year.

The real clincher, however, is the final chart, which shows the trend for this same search over the past seven years. The 2019 figure is, once again, annualised and the numbers for 2014 and 2013 are artificially low since not all of our news feeds go back that far. Still, it is clear that after strong growth in the past two years, pessimism over Asia’s economic prospects is rising very markedly.

Despite the drop in most stock markets over the past few days, I do not think that asset prices are fully discounting this growing macro risk. But experience suggests they will catch up and, when they do, that they will overcorrect. That, as Warren Buffett says, would be the time to be greedy rather than fearful. In the meantime, stay on recession watch.

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