Business sentiment at Asia's top companies rose in the first quarter to its highest level in eight quarters, with global economic uncertainty seen as the biggest risk to the positive outlook, a Reuters survey showed. Friday's devastating earthquake and tsunami in Japan has further raised concerns about the global economy, with some analysts saying Japan may now slip back into recession, at least in the short term.
The Reuters Asia Corporate Sentiment Index rose to 80 in the first quarter, up from 77 in the fourth quarter of 2010 and its highest level since Reuters began collecting data in June 2009. An index above 50 indicates a positive outlook. The index was compiled from a poll of 100 executives at Asia's top companies between March 4-14.
The bulk of the 64 responses came in before the earthquake and tsunami. Eight companies, of which three were Japanese, replied after the initial disaster but before the extent of the damage to nuclear facilities and the risks of radioactive leaks emerged. Business sentiment in Japan appeared to be shifting away from a bearish tone. More than two-thirds of the 18 Japanese companies in the poll, which included Panasonic and Daiwa Securities, were neutral about the outlook, with five positive.
There were no negative responses compared with three in the fourth quarter. All three companies that replied to the poll after the earthquake said they were positive about the outlook, with one of these firms - a technology firm - shifting from a neutral stance in the December poll.
Of the 64 respondents in the survey - market leaders in sectors such as autos, technology, finance and resources - 36 said they were upbeat about the outlook for their business over the next six months. Four companies were 'very positive' and just one in Asia, a South Korean firm, had a 'negative' outlook. The rest were 'neutral.' Asian economies will continue to grow strongly this year, even as Japan struggles with the aftermath of the earthquake and tsunami, ratings agency Standard & Poor's said on Wednesday.
China and India could yet see decades more of strong growth, the Reserve Bank of Australia's governor Glenn Stevens said last week. It is this positive outlook that has bolstered sentiment in other Asian countries as well as sectors such as resources, shipping and financials. The Indian government, in its annual budget last month, said it expects India to grow at 9 percent, plus or minus 0.25 percent in the next fiscal year.
In Australia, the corporate mood changed a bit, with five of the seven companies polled opting for a neutral stance in their outlook over the next six months, compared with mostly positive in the preceding quarter. Twenty-three firms said economic uncertainty was the big risk to the outlook, 17 cited rising costs and 20 said other factors such as high oil prices, regulation and inflation were the major concerns.
Central banks across Asia are under pressure to act to stave off inflationary pressures as crude oil prices stay near a 2-1/2 year high on unrest in the Middle East. China, South Korea, Vietnam and Thailand have all raised rates this year. Brokerages Morgan Stanley and Bank of America-Merrill Lynch recently lowered their growth forecasts for India's GDP to 7.7 percent and 8.2 percent, respectively, for the 2011/12 fiscal year starting in April.