* Index slides to 69 in Q2 from 74 in Q1
* Global economy cited as biggest risk to business
* Asia-focused sectors less vulnerable to slowdown
* China sentiment weakest since survey began in 2009
By Eveline Danubrata and Aradhana Aravindan
SINGAPORE/MUMBAI, June 20 Asia's top companies
are less upbeat on their business outlook than in the first
quarter, with mounting concern over the euro zone crisis and a
slowdown in China's growth, according to the latest Thomson
Reuters/INSEAD Asia Business Sentiment Survey, published on
The Thomson Reuters/INSEAD Asia Business Sentiment Index
slid to 69 in June from 74 in March, when it saw a
dramatic 14-point jump from the December survey. A reading above
50 indicates an overall positive outlook.
"It's obvious there are a few macro headwinds," said James
Koh, analyst at Maybank Kim Eng in Singapore. "Companies are
understandably a little worried. On one hand, you have the Greek
fall-out and, on the other hand, we have already seen a mild
deceleration of growth in China."
Of the record 177 Asian companies polled, 78 said their
business outlook for the next six months was positive, while 87
said it was neutral, and 12 were negative. The poll was
conducted by Thomson Reuters in association with INSEAD, a
global management and business school in Singapore and France,
between June 4-15.
Asked what was the biggest risk factor they face, 111
companies said global economic uncertainty, and 28 cited rising
"Things are looking tougher with what's happening in the
global economy. Asia is not fully insulated but will still do
relatively better given that most governments in the region
still have leeway to stimulate domestic economies," said Kristy
Fong, investment manager at Aberdeen Asset Management Asia.
"Cost pressures are another issue, such as rising
inflationary pressures in Singapore (and) infrastructure and
logistical bottlenecks in India."
Carey Wong, analyst at OCBC Investment Research, said
end-consumers were turning more cautious in placing orders. "As
long as customers don't give them very clear order indications,
sentiment won't be that good. As a business owner, you can't
plan ahead, such as planning capital expenditure."
Europe's ongoing debt crisis and worries over a slowing
China battered stock markets globally in the second quarter,
knocking the MSCI world equity index down by
more than 13 percent.
Sentiment in industry sectors heavily dependent on the
global economy, such as shipping and financials, deteriorated
the most, the quarterly survey showed.
"Asian businesses - the big exporters - face potential
weakness in essentially most of their end-markets," said Nick
Paulson-Ellis, the India head at Espirito Santo Securities.
"It's clearly not going to be an easy time. You've got
slowdowns domestically after pretty aggressive tightening last
year in a lot of developing economies and you've got weakness in
end-markets, so it's a very, very tough period for Asian
Shippers - those surveyed included Hyundai Heavy Industries
and Daewoo Shipbuilding & Marine Engineering
- saw the biggest drop in sentiment from the March
survey, but consumer-related sectors such as retail, drugs and
food were more positive than in March.
"Companies in consumer staples such as instant coffee and
supermarkets seem to be slightly more bullish, especially those
more concentrated in ASEAN," said Maybank Kim Eng's Koh.
"They're less affected by any slowdown in industrial production
and higher-end spending, and their exposure is more local rather
By country, Australia had the lowest reading of 42 - the
only score below 50 - while all Philippine companies polled were
Sentiment among Chinese firms fell to the lowest level since
the survey began in 2009, ahead of only Australia and Taiwan, as
the world's second-biggest economy showed signs of slowing.
But Elvic Ng, Hong Kong-based head of research at UOB Kay
Hian, sees a pick-up in China's economic growth and business
sentiment in the next 6-12 months, as a June 7 interest rate cut
and monetary easing are signs the government has shifted to
pro-growth monetary and fiscal policies.