Domestic business sentiment hits two-year high in Q2 as China's economy stabilises

But rising corporate debt remains a key risk.

Business sentiment at Singapore's largest companies improved significantly in the second quarter, the latest Thomson Reuters/INSEAD Asian Business Sentiment Index showed.

Corporate sentiment rose to 63 in Q2, a sharp jump from just 50 in Q1. The index represents the six-month outlook of some of the city-state's largest firms. A reading over 50 indicates a positive view.

In China, corporate sentiment is at its highest in almost a year, with respondents producing a subindex of 75, up from 71 in the previous survey.

"What we are seeing today relative to the past two quarters is that Chinese risk has gone down. People are a little bit less worried about the possibility that something sudden will happen in China," said Singapore-based economics professor Antonio Fatas at global business school INSEAD.

Rising corporate debt in China and its potential to handicap long-term growth was, however, the most cited risk to companies' outlooks, which also included volatile oil prices, central bank policies and terrorism.

Indonesia recorded the quarter's biggest rebound in sentiment with a 22-point jump in its subindex to 64, also helped by government spending on public works.