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Global financial fears keep Asian firms in holding pattern: study

SENTIMENT at some of Asia's biggest companies has deteriorated on the back of a slowing Chinese economy, the Greek sovereign debt crisis and a looming US interest rate hike, deepening concerns about the state of the world economy, according to the latest Thomson Reuters/INSEAD survey.

The Thomson Reuters/INSEAD Asian Business Sentiment Index fell to 70 in the second quarter, from 71 in the first quarter of 2015 and 74 in the same period last year. A reading of above 50 indicates an overall positive view.

By economy, Singapore's optimism returned after three quarters of neutral readings. The reading went up to 59 in Q2 from 50 in Q1. All eleven respondents retained employment levels over the past three months and five reported increased sales.

Meanwhile, Chinese firms were the least optimistic for the first time in nine quarters, with a score near flat at 55. China's economic growth has been dogged by concerns of a property bubble and soft data on retail sales, industrial output and fixed asset investment.

Separately, companies in India recorded the steepest fall in confidence to 84 from 97 in the previous quarter, as fervour over the election of pro-business Prime Minister Narendra Modi gave way to anxiety about whether two rate cuts this year can reignite a sluggish economy, noted the report.

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The biggest gainer was Thailand, scoring 94 versus 79, as firms there adjusted to the disruption of the May 2014 military coup as well as two rate cuts which the central bank said had stabilised the economy.

The poll was conducted from June 8 to 20. Of 117 respondents, 40 per cent were positive - against 45 per cent in the previous quarter - while 60 per cent were neutral. None were negative.

The biggest risk respondents cited was global economic uncertainty, followed by rising costs. Other risks included regulatory uncertainty and rising competition.

By sector, property saw the steepest fall in sentiment, scoring 77 from 88.

"Normally property sentiment goes down when interest rates start to go up, and we haven't seen any of that," said AMP Capital chief economist Shane Oliver. "This is a global phenomenon where we've got very low interest rates and that's helped buoy property markets and development activity, but by the same token there's been a lot of talk that property bubbles might reinflate."

On the flip side, the building sector recorded the survey's brightest outlook of 86, from 79 in the previous quarter. The shipping, finance and auto sectors logged the lowest readings of 56, 57 and 58 respectively.

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