* ThomsonReuters/INSEAD Q3 index drops to 66 from 71 in Q2
* China, S.Korea, Taiwan and Singapore fall as exports hurt
* Shipping and financial sectors turn in most negative
By Anshuman Daga
SINGAPORE, Sept 18 Business sentiment among
Asia's top companies deteriorated in the third quarter, led by
businesses in export engines such as China and South Korea,
ending three consecutive quarters of improving sentiment, the
latest Thomson Reuters/INSEAD Asia Business Sentiment survey
The Thomson Reuters/INSEAD Asia Business Sentiment Index
fell to 66 in the third quarter from 71 in the second
quarter when it reached the highest level in more than a year.
An index reading above 50 indicates an overall positive outlook.
Some of the weakest readings came from north Asia's
economies of China, South Korea and Taiwan, and regional trading
hub Singapore, all of which turned in readings of 50 -
highlighting the impact of a stuttering global economy.
"Asian companies are still maintaining a relatively cautious
outlook regarding their earnings growth prospects," said Fan
Cheuk Wan, chief investment officer for the Asia-Pacific region
at Credit Suisse's private banking and wealth management unit.
"It could be partly related to the recent volatility across the
emerging economies over the past three months."
Asian equities, currencies and bonds have taken a beating
over the last few months after the U.S. Federal Reserve hinted
it would halt its nearly five-year policy of flooding markets
with cheap cash.
"This market volatility also inevitably has an impact on the
perception and business sentiment of Asian corporates as they
are still assessing the global growth outlook," Fan said.
The survey showed that shipping and financial sectors were
the most negative with a third-quarter score of 50, a sharp drop
from the shipping industry's reading of 80 and financials'
reading of 78 in the second quarter.
The poll conducted by Thomson Reuters News in association
with INSEAD, a global business and management school, surveyed
more than 100 executives in 11 Asia-Pacific countries across
sectors including autos, financials, resources, food and retail.
Of the 90 companies that replied to the poll, held between
Sept. 2-13, two-thirds reported a neutral outlook, just less
than one-third were positive on their prospects and about 1
percent reported a negative outlook.
China showed no signs of improvement, with business
sentiment staying flat for a third consecutive quarter as all
eight companies surveyed said their business outlook remained
However, markets have been comforted by the latest batch of
economic data, adding to evidence that China may have avoided a
"We do know that Europe continues to struggle and there was
a soft patch a few months ago in China," said Craig James, chief
economist at Commonwealth Securities in Sydney. "There's also
the fact that while there's a recovery underway in the United
States, it's somewhat patchy.
"So I think the export-orientated economies are basically
suffering as a result of that," James said. "The good news is
more recent data seems to suggest a little bit more momentum
returning to some of the major economies and regions but there
is a lag in effect."
As recently as a month ago, investors were worried that
China's economy was slipping into a deeper-than-expected
downturn. But policymakers have stepped in with measures to
steady the economy, from quicker railway investment and public
housing construction to introducing policies to help smaller
companies with financing needs.
The survey showed that business confidence was steady in
Japan at 63, its highest point since June 2010 among the 20
companies surveyed, which included Canon Inc and
pharmaceutical firm Daiichi Sankyo.
"If we look at forward-looking indicators, we do see quite
solid evidence showing that the global growth recovery should be
providing support for an improved growth outlook for Asia," said
Fan from Credit Suisse.
Companies in Indonesia were the most negative with a reading
of 25, a sharp drop from its second-quarter reading of 100 when
it was one of the most positive.
Indonesian companies are seeing an increase in their
borrowing costs, with the central bank's surprise hike in
interest rates last week. Wallowing near a 4-1/2-year-low, the
Indonesian rupiah is the worst performer in Asia this year among
currencies tracked by Reuters, having lost around 16 percent
against the dollar.
However, there are some bright spots in Southeast Asia.
The Philippines was the most positive economy with a reading of
100 - the only economy with a top score - compared to its
reading of 94 in the second quarter. Australia was the
second-most positive with a reading of 79, up from 75.