Asia’s top companies are at their most optimistic in five quarters as robust economic growth in the region outweighs concerns about debt problems in Europe and renewed market volatility, a new Reuters index shows.
The Reuters Asia Corporate Sentiment Index stood at 78 in the second quarter – an index above 50 indicates a positive outlook.
The index is at the highest in five quarters when compared with a Reuters’ internal study of Asia business sentiment over the past year. Based on that study, the index was at 76 in the first quarter of 2010 and 45 a year ago.
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More than half of the 62 companies in the survey – market leaders in sectors such as autos, technology, finance and
resources – said they are upbeat about the outlook for their business over the next six months.
That note of optimism comes at a time when a debt crisis in the euro zone has clouded the outlook for global growth in the wake of the financial crisis.
Still, Asian economic growth has powered ahead in recent months, bolstered by resilient domestic demand and strong growth from China, the world’s third-largest economy.
“There’s been a lot of market concern over Greece, but if you look at Asian economic activity, that’s happened without Europe,” said Richard Jerram, head of economics at Macquarie Securities in Tokyo.
“There’s been strong demand across the region and you can divide the contribution between China and policy stimulus during the financial crisis.”
The Reuters Asia Corporate Sentiment Index was compiled from a survey of top company executives between June 9-15.
Reuters contacted senior company officials from leading companies in the airlines, autos, building, drugs, financial,
food, property, resources, retail, shipping and technology sectors.
More than half the firms surveyed from the technology and financial sector view the six-month outlook for their business as ‘positive’ to ‘very positive.’
Four of five shipping firms polled are ‘positive’, with one ‘neutral’, compared with the first quarter when outlooks were mixed.
Only three companies are ‘negative’ about the six-month outlook – a drug maker that maintained its view from the
previous quarter and two resource companies that had previously been more upbeat.
Japanese firms are slightly more cautious than their Asian peers – just over half the 20 Japanese companies surveyed are ‘neutral’ on the outlook, eight of which had been ‘positive’ in the first quarter. Japanese corporates taking part in the survey included Canon and Hitachi.
“The pace of recovery in Japan has been more subdued than elsewhere and the domestic economy is still struggling. It’s not as bad as a year ago but you can understand why companies exposed to this may be less positive than others,” said Jerram.
Japanese manufacturers, however, are more optimistic about economic conditions than for over two years, a separate Reuters poll showed on Thursday, as strong exports to fast-growing Asia continue to drive economic recovery.
China, India are key drivers
Of the 62 respondents to the Reuters sentiment survey, 34 view the six-month outlook as ‘positive’ and four are ‘very positive’. Three companies have a ‘negative’ outlook. The rest are ‘neutral’.
The latest survey marks a change from the quarterly studies conducted previously in which a company’s six-month outlook was gauged from company statements and executives’ public comments.
All seven Indian firms in the poll, which includes ICICI Bank Ltd, are ‘positive’ to ‘very positive’ on their outlook,
with four more upbeat than in the first quarter.
Chinese firms surveyed are mostly ‘positive’, particularly those in the financial sector, which were previously ‘neutral’.
India’s economy grew at its fastest pace in six months in the March quarter on the back of government and consumer spending, while China chalked up annual growth of 11.9 percent in the first quarter.
“Consumption and the economic growth story are supporting the topline and bottomline of Indian companies, and that’s also true for some of the top Asian companies,” said K.K. Mital, head of portfolio management services at Globe Capital in New Delhi.
Optimism about Asia’s fast growing economies helped shore up business confidence elsewhere in Asia.
Ari Hudaya, CEO at Bumi Resources, Indonesia’s biggest coal miner, said the outlook was positive thanks to increasing demand from India and China.
In Southeast Asia, nine of the 15 companies surveyed, which included largest lender DBS Group, view the six-month outlook as ‘positive’, while two are ‘very positive’.