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HIGHLIGHTS-Thomson Reuters/INSEAD Q2 Asian Business Sentiment Survey -by sector

Published 22/06/2016, 01:00 pm
© Reuters.  HIGHLIGHTS-Thomson Reuters/INSEAD Q2 Asian Business Sentiment Survey -by sector

BENGALURU, June 22 (Reuters) - Business sentiment at Asia-Pacific's biggest companies rose in the second quarter of 2016 to its highest in a year, but firms were wary about risks stemming from rising corporate debt in China and volatile oil prices, a Thomson Reuters/INSEAD survey showed.

The Thomson Reuters/INSEAD Asian Business Sentiment Index .TRIABS RACSI , representing the six-month outlook at 139 firms, was 67 for April-June versus 65 three months prior.

Companies in the retail and leisure sector were the most optimistic, while energy firms and utilities were also upbeat. Construction and engineering firms ranked lowest in sentiment with a subindex of 50 - the level separating optimists from pessimists.

RETAIL & LEISURE: SURVEY'S MOST OPTIMISTIC AT 82 VS 77 IN Q1

Seventeen companies that broadly fall into the retail and leisure sector responded to this quarter's survey, including Japan's Fast Retailing Co Ltd 9983.T , South Korean online games maker NC Soft Corp 036570.KS , the Philippines' Bloomberry Resorts Corp BLOOM.PS and Thai hotelier Minor International PCL MINT.BK .

Eleven said they were positive about their six-month business outlook whereas six were neutral. Six said the chief risk to their outlook was the fallout from a rise in Chinese corporate debt.

Ten firms reported a rise in business volume compared with three months prior, four said asset quality had improved, and five took on more staff.

ENERGY & UTILITIES: MORE BUSINESS SEES INDEX UP TO 68 VS 54

Five of eleven energy firms and utilities that included Thailand's PTT PCL PTT.BK and Ratchaburi Electricity Generating Holding PCL RATCH.BK offered a positive outlook for the coming half-year, whereas five were neutral and one negative.

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Key outlook risks included deterioration in China's economy, the U.S. Federal Reserve's monetary policy and low crude oil prices.

Four respondents said the volume of business had risen over the past three months and three reported improvement in asset quality, while just two increased staff.

HOUSEHOLD, FOOD & BEVERAGE: STEEPEST-EVER FALL TO 67 VS 100

Of nine respondents, which included Japanese brewery Asahi Group Holdings Ltd 2502.T and Philippine snack food maker JG Summit Holdings Inc JGS.PS , four could see a bright second half whereas one was of the opposite opinion and the rest neutral.

Each respondent cited a different risk to their outlook. These included rising Chinese corporate debt, low oil prices, currency volatility, stagnating consumption and the impact of Britain voting to leave the European Union on June 23.

Most respondents cited no change in the quality of assets or number of employees over the past three months. Two firms reported a rise in business volume while another two reported a fall.

FINANCIALS: QUARTER'S STEEPEST RISE IN SENTIMENT TO 65 VS 47

Eight firms were positive about the next six months, while 14 were neutral and one was negative. Respondents included Union Bank of the Philippines UBP.PS and compatriot Metropolitan Bank and Trust Co MBT.PS .

Rising corporate indebtedness in China was by far the chief risk cited, with other risks including changes to central banks' policy interest rates, competition and diplomatic disputes.

Nine booked a rise in the volume of business and six reported improved asset quality, while five added personnel.

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CONSTRUCTION & ENGINEERING: ONLY NON-POSITIVE AT 50 VS 70

Six of eight respondents categorised as construction and engineering firms offered a neutral outlook for the coming half-year while one gave a positive view and another was pessimistic.

Australia's James Hardie Industries PLC JHX.AX , India's Reliance Infrastructure Ltd RLIN.NS , Japan's Hitachi Ltd 6501.T and South Korea's Hyundai Heavy Industries Co Ltd 009540.KS featured among respondents who said the top risks to their outlooks were low energy prices, a slowing Chinese economy and change in government policy.

Three companies saw a loss of business volume compared with three months prior and three cut headcount.

MOST OTHER SECTORS RISE

Sentiment also rose in the technology and telecommunications sector, to 65 from 57, and in transport and logistics, to 64 from 50. In metals and chemicals, sentiment edged up to 64 from 63.

Companies in the real estate and autos sectors again registered sentiment subindexes of 63, as in the first quarter, while optimism was shaken somewhat among healthcare firms, whose subindex fell to 72 from 92.

Note: Companies surveyed change from quarter to quarter.

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Highlights by economy

PDF of survey

http://tmsnrt.rs/28IB1Kk Graphic: Business sentiment index

http://tmsnrt.rs/1Qec4uG Graphic: Biggest perceived risks

http://tmsnrt.rs/1QebWeT Graphic: Outlook by economy

http://tmsnrt.rs/1Uxuw24 Graphic: Outlook by sector

http://tmsnrt.rs/1UxuFT3 Advisory

(Writing by Anu Bararia; Editing by Christopher Cushing)

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