Business Sentiment in Asia on a high in Q4; India remains upbeat

Category: Global Economy Sub-category: World Economy
Document type: news

8 Dec, 2010

Business sentiment at Asia's leading companies rebounded in the fourth quarter as corporations shrugged off concern that the debt crisis unfolding on Europe's fringes will hobble growth. There was a rise in the Reuters Asia Corporate Sentiment to 77 in the quarter to 69 in the second quarter, the second highest reading since Reuters began collecting data in June 2009.

The value of the index was way above 50, the mark which separates positive from negative outlooks, with sentiment especially strong in the resources, financial and property industries that have benefited from robust growth within Asia as strong inflows of cash begin. However, sentiment in the technology sector remained the most cautious due to greater exposure of the sector to the global economic cycle.

Fast growing economies of India and China remained most upbeat, while Japanese corporates were the most wary about the outlook for their business. The strong growth within Asia has allayed fears of a fresh recession as Europe supports its common currency with emergency loans to Ireland. Australia and South Asia are on a growth with mostly positive sentiments about the economy.

The Reuters Asia Corporate Sentiment Index was compiled from a survey of top company executives between Nov. 24 and Dec. 3. Reuters polled 100 major firms in the following industries: airlines, autos, building, drugs, financial, food, property, resources, retail, shipping and technology. Of the 71 companies in the survey, 36 viewed the six-month outlook for their business as 'positive', 10 percent more of respondents than in September, with six 'very positive' and 25 firms 'neutral'. Only four held a 'negative' outlook.

However, some analysts are of the opinion that the risks for Asian businesses remain and there is a degree of over-exuberance which companies may regret in 2011. An example of the same is China's proposal to spend up to $1.5 trillion over five years to transition its emerging economy into a technology leader. In the meantime, China's economic expansion continues at only a slightly diminished pace, rising by 9.6% in the quarter to Sept.30.

More than half of the 11 firms in Australia were polled upbeat, but the majority of those in the financial sector said they were neutral, which may be a reflection of worries about slow growth rates and plans to tighten bank regulation.

Resource companies, including Coal India, the world's coal miner, which fill their holds with coal, steel, and other fuel and metals, remained one of the most upbeat sectors in Asia for a second quarter running. China and its excessive need for commodities such as coal and iron is what the story is about for these companies.

The sentiment in the property sector also received a boost due to the prospects of the Chinese economy, despite efforts by the Chinese government to cool the housing market.