Business sentiment at Asia's top companies fell in the third quarter, marking the first decline in six quarters, as growing concerns about the global economic outlook dented optimism. The Reuters Asia Corporate Sentiment Index dropped to 69 in the quarter from 78 in the second quarter, which was the highest since Reuters began collecting data in the June quarter, 2009.
-- Japan, Australia, Korea cautious on 6-mth business outlook
-- India, China, Southeast Asia upbeat
Still, strong economic growth within Asia continues to underpin sentiment, and the index remains well above the 50 mark that divides a positive outlook from a negative one. A shift towards a slightly more cautious outlook since June comes against a backdrop of mixed US economic data that has raised fears about a double-dip recession. In addition, European countries are set to cut spending, China is taking steps to cool its economy and Japan has warned of risks to its economy from a strong yen and slowing overseas growth. "The increased concern about a double-dip in the West, mainly the United States, coupled with a concern about how far Chinese policy makers will go with tightening measures are weighing on sentiment," said Kirby Daley, a senior strategist at Hong Kong brokerage Newedge Group.
Of the 59 companies in the survey, 24 view the six-month outlook for their business as 'positive' and five are 'very positive'. Twenty four firms are 'neutral', while six have a 'negative' outlook - double the number in June. The shift to a more cautious outlook was most marked in the tech sector, where respondents included India's Infosys Technologies, Japan's Canon and Taiwan's Acer.
Almost three quarters of the technology firms surveyed viewed the business outlook as 'neutral' compared with about a third in the June poll. Just three of the 13 technology companies respondents were 'positive'. Infosys and Wipro Ltd, India's No 2 and No 3 software services exporters, said on Monday that customers remain cautious about technology spending. Half the firms surveyed from the financial sector said the six-month outlook for their business was 'positive' to 'very positive', down slightly from the previous quarter.
Japanese firms, which were slightly more cautious than their Asian peers in the second quarter survey, remained so - 11 of the 18 companies said the six-month outlook for their business was 'neutral', while four said it was 'negative'. In Australia, more than half the companies surveyed were 'neutral' about the business outlook, while in South Korea two of the five companies polled held a 'negative' outlook, with one shifting from a 'positive' stance in June.
Corporates in Southeast Asia, China and India remained the most upbeat in Asia. India, Malaysia and the Philippines were the only countries where some companies were 'very positive'. Of the eight Chinese companies in the survey, three-quarters were 'positive' about the outlook. That sentiment appears to be backed up by the latest economic numbers out of Beijing.
Chinese factories ramped up production in August and money growth easily topped expectations, showing that the economy remained buoyant despite government efforts to clamp down on bank lending and property speculation. Expectations of strong demand from China may help explain why most resource firms in Asia are optimistic. Of the six resource firms in the poll, which includes mining giant Rio Tinto, four viewed the six-month outlook as 'positive', while one was neutral and the other negative. In the second quarter poll, of the five resource firms that responded, two were 'positive'. "The Chinese situation seems to be a freight train economy running along. They'll be needing more and more commodities as they go forward," said James Wilson, resources analyst at Australian stockbroker DJ Carmichael.
Airlines were also among the more upbeat companies in the region, with all three airlines in the survey viewing the six-month outlook for their business as 'positive' - one of those shifted from a 'neutral' view in the June poll. Aviation fell into a nosedive after the global financial crisis but airlines are growing more confident as economic recovery takes hold, with expectations of profitability rising.
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