TOKYO • Sentiment at Asia's biggest firms tumbled in the third quarter at a record pace because of growing concerns about the economic slowdown in China and the risks it poses to the global outlook, a Thomson Reuters/Insead survey shows.
The Thomson Reuters/Insead Asian Business Sentiment Index, representing the six-month outlook at 79 firms, hit 60 in the September quarter, down from 71 in June and 66 a year prior. A reading over 50 indicates a positive view.
The 11-point quarterly decline was the steepest since the survey began in 2009, dragging the index to its lowest in almost four years, and showing the extent of damage that a slump in Chinese shares during the quarter had on regional corporate sentiment. The survey, featuring responses from Japan's Canon, South Korea's Kia Motors, Singapore's Neptune Orient Lines (NOL) and India's NTPC, among others, also showed concern about a decline in emerging-market currencies, which is a threat to economic activity as firms could scale back expansion plans.
The 11-point quarterly decline was the steepest since the survey began in 2009. Companies in Singapore were the most pessimistic... as its financial sector and its port feel the chill from China's slowdown.
"Global uncertainty hasn't gone away," said Insead economics professor Antonio Fatas.
"In fact, it is getting bigger because of China. Asia does not have another engine to replace China. The region has to adapt to that."
Companies in Singapore were the most pessimistic with the country's index falling to 14 from 59, as its financial sector and its port feel the chill from China's slowdown.
Only five companies from China replied to the survey, none of which was downbeat. Only one was concerned about the domestic economy, while two were more worried about emerging currencies.
The survey's biggest gainer was the Philippines, which jumped to 100 from 78 in the previous quarter as the country's economy defies a regional slowdown due to robust government spending.
Thomson Reuters and global business school Insead conducted the poll from Sept 7 to 19. Of 79 respondents, 20 per cent had a negative outlook - the most in six years. The survey showed 30 per cent of companies were neutral, while 41 per cent were optimistic about business conditions for the next six months.
The index measuring the financial sector fell to a record low of 40 as the prospect of a prolonged slowdown in China could further roil financial markets and curb demand for new loans. Asia's lenders, such as India's HDFC Bank and PT Bank Rakyat Indonesia (Persero), cited concerns about the currency market, stocks and oil prices.
Firms outside the financial sector also expressed concern about the recent sell-off in emerging-market currencies as it hurts their ability to diversify away from home.
"We are worried about Brazil's real because of the amount of business we have in that country," said Japanese beer and beverage maker Kirin Holdings' deputy director of corporate communications Nobuhiko Hori. "We are also concerned about our exposure to South-east Asian currencies. This is all coming at a time when we're dealing with declining demand for beer in our domestic market."
In shipping - with responses from NOL and Korea's Hyundai Heavy Industries - the index fell to the survey's lowest of 25. That is likely a warning that global trade is slowing as demand in some economies starts to cool, analysts said.