Are dark clouds ahead for Asian businesses?

ASIA BUSINESS SENTIMENT FALLS IN Q3

Sentiment at Asia’s top companies fell in the third quarter, hitting its lowest level since the fourth quarter of 2009 as doubts about the strength of the global economy weighed, a Reuters survey showed.

Weak U.S. economic data, a debt crisis in the euro zone and worries about inflation and tighter monetary policy in Asia have clouded the outlook for the global economy, denting sentiment across the board.

The Reuters Asia Corporate Sentiment Index fell to 63 from 71 in the second quarter of 2011, having peaked at 80 in the first quarter. An index above 50 indicates a positive outlook.

“I don’t think it’s surprising at all that sentiment has turned down over the quarter. Clearly it’s been a pretty volatile time for global markets stemming from both the U.S. and Europe,” said Stephen Halmarick, head of investment markets research at Colonial First State Global Asset Management in Sydney.

“Asian markets have been rattled by the ongoing sovereign debt crisis in Europe, the slowdown in the U.S. economy, debt ceiling worries, and the (U.S. credit) downgrade.”

ASIA BUSINESS SENTIMENT FALLS IN Q3
The index was compiled from a poll of 100 executives at Asia’s top companies taken between Sept 2-9 and included a range of sectors including autos, financial, technology, resources and property.

The 71 responses showed almost 40 percent of companies were positive or very positive about the outlook, down from 48 percent in the second quarter.

In the current quarter, 14 percent of the companies were negative or very negative, more than double the previous quarter.

About 46 percent were neutral, little changed from the previous quarter.

GLOBAL OUTLOOK DIMS
Across Asia, global economic uncertainty was seen as the biggest risk to the business outlook over the next six months, cited by 42 companies.

Rising costs was the main obstacle for nine companies, with 13 companies citing risks ranging from regulatory changes to commodity prices to environmental policies. Seven companies in Japan cited currency risks from the perennially high yen.

Economic uncertainty has only worsened since the second-quarter survey with events like the credit downgrade of U.S. debt and ongoing concerns over Europe’s debt crisis.

“Clearly the concern is that the sovereign debt crisis in Europe could turn into a banking crisis and that could affect the flow of funds around financial institutions around the world,” Halmarick at Colonial First State Global Asset said.