March 23 (Reuters) - Optimism for the coming six months among Asia-Pacific's biggest firms picked up in the first quarter of 2016, tempered mainly by concerns about declining demand in China and excessive currency volatility, a Thomson Reuters/INSEAD survey showed.
The poll of 97 companies yielded a Thomson Reuters/INSEAD Asian Business Sentiment Index .TRIABS RACSI of 65 for January-March, from 58 three months prior.
Firms in the household, food and beverage sector were the most optimistic followed by those in healthcare, while the financial sector was alone in logging an index below the midway mark of 50, indicating a pessimistic outlook.
HOUSEHOLD, FOOD & BEVERAGE: RECORD HIGH AT 100 VS 50 IN Q4
All eight respondents from the household, food and beverage sector rated their six-month business outlook as positive. That yielded an index of 100 for the first time for the sector, as well the steepest sector gain from the previous quarter.
Firms cited excessive currency volatility as the chief risk to their outlooks, followed by increased competition.
Over the past three months, two companies each reported an increase in the volume of business, staffing and quality of assets.
HEALTHCARE: SECTOR'S SECOND STRAIGHT RECORD AT 92 VS 88
Japanese drugmaker Daiichi Sankyo Co Ltd 4568.T and Malaysian medical gloves maker Kossan Rubber Industries Bhd KRIB.KL were among six healthcare respondents of which five saw an upbeat half-year while one was neutral.
Firms said excessive foreign exchange volatility was the top outlook risk. Three added business over the past three months, three added staff and three saw improvement in asset quality.
RETAIL & LEISURE: MOST OPTIMISTIC IN A YEAR AT 77 VS 60
Of 11 respondents - which included Japan's Fast Retailing Co Ltd 9983.T and Thailand's Home Product Center PCL HMPRO.BK - six gave a positive outlook while the rest were neutral. Most flagged a drop in Chinese demand as their chief risk.
All 11 booked increased business from three months prior. Five each reported improved asset quality and increased staff.
CONSTRUCTION & ENGINEERING: SURVEY'S STEEPEST FALL, 70 VS 90
Japan's Hitachi Ltd 6501.T was among five construction and engineering respondents, of which two saw their six-month outlooks as positive while three were neutral. Two each considered their top risks to be declines in equity prices and Chinese demand.
One company reported a decline in business volume compared with three months earlier, while one company said staffing was lower. One firm reported improvement in asset quality.
REAL ESTATE: SENTIMENT INDEX RECOVERS SLIGHTLY AT 63 VS 57
Australia's Stockland Corp Ltd SGP.AX was one of eight real estate firms of which two were positive and the rest neutral about their April-September outlooks. Excessive volatility in financial markets was a key risk along with tighter credit.
One company added and one lost business; one added and one lost headcount; and two companies reported a rise in asset quality.
AUTOS: SECTOR'S HIGHEST INDEX IN OVER A YEAR AT 63 VS 60
Only one of four auto-related companies rated their six-month business outlook positively while the rest were neutral, with excessive volatility in foreign exchange cited as one of the biggest risks.
Two firms reported staffing cuts. Two saw a rise in business volume compared with one which saw business fall.
METALS & CHEMICALS: SECTOR'S FIRST READING AT 63
India's Tata Steel Ltd TISC.NS was among four metals and chemicals companies - captured in previous surveys under the heading Resources - of which two rated their six-month outlooks as positive, one was neutral and one was negative.
The firms flagged declines in demand from China as well as in share prices as the primary risks to their outlooks. Over the past three months, two companies each reported an increase in business and asset quality. One firm added staff, while two cut.
TECH & TELECOM: LOWEST INDEX IN OVER A YEAR AT 59 VS 60
Delta Electronics Thailand PCL DELTA.BK and Taiwan's Far EasTone Telecommunications Co Ltd 4904.TW featured among 17 technology and telecom respondents, of which 14 had a neutral outlook while just three were positive.
Three firms said excessive currency volatility was the chief risk to their outlooks, while two cited a drop in Chinese demand. Other risks included rising competition and regulatory change.
Four firms reported improvement in asset quality, while four booked a rise in business and two logged a decline. Headcount was higher at two companies and lower at one.
ENERGY & UTILITIES: INDEX DIPS TO 54 VS 58
Australia's Oil Search Ltd OSH.AX and the Philippines' Energy Development Corp EDC.PS were among 12 energy firms and utilities of which five were upbeat about the coming half-year and four negative.
Five respondents said the chief risk to their outlooks was the price of oil, which has been hovering at historical lows.
Six enjoyed increased business over the past three months versus two which lost out, and three added staff whereas two cut. Three booked a rise in asset quality while one saw a fall.
TRANSPORT & LOGISTICS: NEUTRAL AFTER TWO NEGATIVES, 50 VS 36
Korea Aerospace Industries Ltd 047810.KS and five other transport and logistics respondents offered business outlooks that were equally distributed between positive and negative. That yielded an overall neutral sentiment index after two consecutive quarters of pessimism.
Chief risks included weak global trade, tighter bank credit and falling consumer demand. Over the past three months, four gained business compared with two that lost, and two added staff versus three that cut. Three firms said asset quality had improved whereas one reported deterioration.
FINANCIALS: SURVEY'S ONLY PESSIMISTS WITH INDEX AT 47 VS 50
Of 15 financial institutions, including PT Bank Rakyak Indonesia (Persero) Tbk BBRI.JK and China Pacific Insurance Group Co Ltd 601601.SS , three rated their six-month outlook as negative while two were positive and the remainder were neutral.
Four cited a decline in Chinese demand as the primary risk to their outlooks, while others cited financial market volatility, changing regulation and interest rates.
Three financial institutions reported an increase in the volume of business, compared with two where business had declined. Three added staff and three cut. Four saw improvement in asset quality while four saw a deterioration.
Note: Sector names updated from 2016 Q1; companies surveyed change from quarter to quarter.
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Highlights by economy
PDF of survey
http://reut.rs/1pG5AJi Graphic: Business sentiment index
http://reut.rs/1SWv1i5 Graphic: Biggest perceived risks
http://tmsnrt.rs/1UxuYNJ Graphic: Outlook by economy
http://tmsnrt.rs/1Uxuw24 Graphic: Outlook by sector
http://tmsnrt.rs/1UxuFT3 Advisory
(Writing by Krishna Eluri; Editing by Christopher Cushing)