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[SINGAPORE] Sentiment at some of Asia's biggest firms deteriorated again in the fourth quarter, falling to a four-year low under the weight of concerns about slowing growth in China, the region's biggest economy, a Thomson Reuters/Insead survey showed.
The Thomson Reuters/Insead Asian Business Sentiment Index, representing the six-month outlook at 103 firms, was 58 in the December quarter from 60 in September and 72 a year prior. A reading over 50 indicates a positive view.
In Singapore, which counts China as its top trading partner, the business sentiment index was at 21, the lowest among the 11 economies in the poll. The reading for Australia, a major supplier of resources to China, was also the lowest in three years.
China's economy - growing at its slowest pace in six years - ranked as the chief risk to corporate forecasts for the second consecutive quarter, with volatile financial markets also of concern, showed the survey whose respondents included SoftBank Group, Kia Motors, Tata Steel and Olam International.
"A very strong revision to the expected growth rate of China (in recent months) is having a bigger effect on all these numbers, across all countries, across all sectors," said Antonio Fatas, economics professor at Insead in Singapore. "If you think of growth in Asia, Asia will do well, Asia will grow faster than most of the regions of the world, but it will grow at a rate very different from the previous 10 years."
At the start of the December quarter, analysts estimated China's 2016 growth at 6.5 per cent versus 6.7 per cent estimated three months prior.
After polling closed for the Thomson Reuters/Insead survey over the weekend, China reported November data that beat market estimates including factory output, retail sales and investment. The showing indicated that stimulus measures might be steadying the economy, analysts said, though falling property prices and high domestic debt featured among challenges.
The impact of change in China's economy is particularly acute for the region's smaller and less diverse countries.
Thomson Reuters and global business school Insead conducted the poll from Nov 30 to Dec 12. Of 103 respondents, 21 per cent were negative - the most in over six years - while 42 per cent were neutral and 37 per cent positive.
Philippine companies emerged as the most optimistic for a second consecutive quarter with a reading of 77, followed closely by those in South Korea, while firms in Taiwan were only a little less pessimistic than those in Singapore.
Indonesia recorded the survey's biggest rebound in sentiment from the previous quarter with a 36 point jump to 63, with China more of a concern than a rise in US interest rates.
Some market watchers had said a US hike, widely expected this week, would prompt an outflow of funds from emerging markets, but Insead's Fatas said these fears appeared to be receding in countries such as Indonesia and Malaysia.
Sentiment in Malaysia remained pessimistic albeit improved at 41 from 25 three months prior, with five of 11 respondents saying their view of the next six months was negative.
"When interest rates or exchange rates or material prices turn volatile, it definitely brings more pressure and problems to many businesses," said Edward Yip, corporate affairs general manager at survey respondent Kossan Rubber Industries Bhd, which makes gloves for the healthcare industry.
"Nevertheless, the effects can be mitigated via active hedging." Shipping-related firms comprised the most downbeat sector for the third consecutive quarter, with a record four negative responses from seven yielding an index of 36. China topped their risk list while others cited oil prices at seven-year lows.
Both food and financial firms ended the poll with a neutral reading of 50. For food, that matched the sector's lowest-ever reading of two years earlier, while for finance firms, which included Yuanta Financial Holdings Co Ltd, the result improved over a lowest reading of 44 hit in September.
At the other end of the sentiment scale were building-related firms including DLF Ltd with a reading of 90, followed closely by pharmaceutical companies.