HONG KONG • Business sentiment at Asia's top companies rose to its highest in almost two years in the first quarter of 2017, buoyed by positive economic signs from the United States and China that underpinned improved global demand, a survey has shown.
The Thomson Reuters/Insead Asian Business Sentiment Index, representing the six-month outlook of 96 firms, rebounded to 70 for January-March from 63 three months prior. A reading above 50 indicates a positive view.
During the quarter, the US and China - the two top destinations for Asian exporters - reported a slew of upbeat economic data that exceeded market expectations.
"Optimism about the US economy, lack of immediate crisis in China, lack of bad news in Europe... have reduced some of the immediate risks," said Singapore-based economics professor Antonio Fatas at global business school Insead.
Sentiment in export-oriented Malaysia rebounded the most, with its sub-index jumping 20 points to a three-year high of 75, as most respondents reported an increase in business volume and a third said staffing had risen in the past three months.
Sentiment also surged in the Philippines by 18 points, with a sub-index of 88 making the country the most optimistic in Asia.
In other export-driven Asian economies too, such as Taiwan, Singapore and Thailand, corporate sentiment improved significantly, while China and India recorded a slight drop from the previous quarter.
"Stronger-than-expected export numbers have provided quite a relief for those economies, at least more than they have for China or India which are more domestically oriented," said Dr Santitarn Sathirathai, head of emerging Asia economics at Credit Suisse in Singapore.
But for Chinese companies such as beauty app Meitu, strong domestic appetite for new services and goods also points to a brighter business outlook that will see user traffic translate into profit.
While the US remains a powerful player in Asia, Asian economies have stepped up trade with China, whose growing presence was highlighted after President Donald Trump withdrew the US earlier this year from the 12-nation Trans-Pacific Partnership.
South Korean firms' business sentiment - the weakest of 11 economies polled - tumbled 32 points to a sub-index of 25, the lowest in almost five years.
Economists say the current optimism may have been built on shaky ground as a series of risk events is expected to re-emerge soon.
"There's a lot of positive sentiment around but there's a risk that people are simply extrapolating forward the recent better news," said Capital Economics' chief Asia economist Mark Williams.
Despite the broader improvement in sentiment, uncertainty over Mr Trump's policies, US dollar rate and demand from China were still seen as the biggest risks to Asian companies' outlooks.
Thomson Reuters and Insead polled companies from March 3 to 17. Of the 96 respondents, 48 per cent rated their six-month outlook as positive, 43 per cent were neutral and 8 per cent were negative.