SINGAPORE (Reuters) - Business sentiment among Asia's top companies rose in the fourth quarter with Indian firms, buoyed by hopes Prime Minister Narendra Modi would live up to his market-friendly reputation, showing the most positive outlook for a third straight quarter.
The rise was weighed down, however, by companies in China which showed the least optimistic reading of 50 on persistent concern about the health of the global economy.
The Thomson Reuters/INSEAD Asian Business Sentiment Index .RACSI rose to 72 in the fourth quarter, up from 66 in the previous three months and the second-highest reading of the last three years.
Confidence among companies in Australia - this year's chair of the Group of 20 major economies - was second only to India in the fourth quarter with an outlook index of 85, up from 75 in the third quarter. Of 13 responses, 10 were positive and two neutral, taking the country to its highest reading since the survey began five years ago.
Companies said new orders and employment levels were largely steady compared with three months prior, while four firms reported increased staff. Like many regional peers, Australian firms flagged global economic uncertainty as their top concern.
Sentiment in China was unchanged as all 16 companies polled reported a neutral outlook, although six firms booked higher orders compared with only three in the previous quarter. With an index of 50 - the lowest possible positive reading - China tied with Singapore as the region's least optimistic economy.
During the quarter, China's stuttering economy showed slowing growth in factory output and investment, which neared a 13-year low. Global economic uncertainty was the top risk identified by eight survey participants, with greater domestic competition and political uncertainty also cited.
Firms in India logged the most optimistic outlook for the third consecutive quarter, buoyed by high expectations for the new government of pro-business Prime Minister Narendra Modi. All 23 respondents reported a positive outlook, with 20 saying new orders increased and eight adding staff.
Rising costs and global economic uncertainty were tied as the top worries, each with seven responses.
Optimism in Japan hovered at 56, almost unchanged from 59, with more respondents worrying about a domestic economy that has fallen into recession and thrown up fresh challenges for Prime Minister Shinzo Abe's reflationary policies.
Of 18 respondents, 12 were neutral on the outlook while two turned negative, versus zero in the previous survey. Companies reported new orders and employment levels similar to the last quarter.
South Korea rebounded strongly with a reading of 75, up from 50, in a quarter when Finance Minister Choi Kyung-hwan pledged to maintain policies to re-energise the economy and keep risks under control. Half of respondents said their outlook was positive, with the rest neutral.
While most companies remained concerned about the global economy, a handful shifted attention to currency concerns, citing lower purchasing power as a main headache.
The outlook index of Taiwanese corporations turned positive in the fourth quarter, jumping from 33 to 71 - the highest since the first quarter of last year. Among the seven companies surveyed, four were positive compared with zero previously.
Half the respondents considered regulatory uncertainty to be their primary risk while the remainder said global economic uncertainty posed the main threat. More than half said they hired more staff after keeping employment steady in the previous quarter.
SOUTHEAST ASIA: MIXED (THAILAND AT 81 VS 90; PHILIPPINES AT 67 VS 83; SINGAPORE AT 50 VS 50)
Singapore stayed put at 50 and Thailand fell one place to third, while the Philippines suffered the survey's steepest drop in optimism.
The outlook in Thailand eased to 81 from 90, with about half of eight respondents reporting steady orders and job numbers. Political uncertainty and volatility in energy prices overtook global economic uncertainty as the main risks.
Confidence in the Philippines fell for the third consecutive quarter, with the index sliding to 67 from 83. Five of nine respondents said they were positive about the business outlook, with most reporting increases in new orders.
Singaporean firms remained the least optimistic, with 80 percent having a neutral outlook and reporting unchanged levels of employment.
Companies in Indonesia and Malaysia, which lodged 75 and 67 respectively in the third quarter, did not respond to the latest survey.
Reporting by Jean Chua; Editing by Christopher Cushing