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.

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 said.

TECH MUTED

Sentiment among technology stocks was muted with an almost even split among the neutral and positive categories. Seven of 18 tech firms reported a positive outlook while eight reported a neutral outlook and the remaining three posted a negative response. This comes after six of 16 in the second quarter reported a positive outlook and the remaining 10 posted a neutral outlook.

Tech companies in China were the most upbeat with all four polled reporting a positive outlook. Tech companies in Japan were the most cautious, with only two of the nine polled expressing a positive outlook and the rest reporting a neutral stance.

In the financial sector, seven of 11 companies polled said they were neutral about the outlook, compared to the second quarter when seven were neutral, but eight reported a positive outlook.

Sentiment among retailers meanwhile remained stable with three reporting a positive outlook, three reporting a neutral outlook and one reporting a negative outlook. The numbers were the same as the second quarter with the exception that one retailer in the second quarter reported a very positive outlook.

CHINA STILL POSITIVE, JAPAN NEUTRAL

Sentiment remained largely upbeat in China with three quarters of the 16 respondents saying their outlook was positive for the next six months compared to 10 out of 13 in the second quarter which were either positive or very positive.

Japan turned more cautious with 19 companies reporting a neutral outlook compared to 15 in the second quarter. South Korea also turned cautious, with three companies reporting a negative outlook compared to three reporting positive outlooks in the second-quarter survey.

More worried about the coming months were the country's resource companies. Two out of four in the survey gave a neutral outlook, citing concerns over commodity prices as the reason.

In Q1 and Q2 you saw commodity prices rising very strongly. Those have definitely all rolled over, said James Soutter, a senior fund manager at Perennial International in Melbourne.

They're not back to dire levels. They're just back to levels we were at 6-12 months ago.

Economists expect a slight slowdown in economic growth in China, which may dip below 9 percent for the first time in more than a decade as weaker demand in debt-ridden Europe and elsewhere squeezes the nation's exporters.

The mood in Japan, Asia's No. 2 economy, was less upbeat, with 19 out of 26 respondents saying they had a neutral outlook for their businesses over the coming months. One was negative, with six feeling positive about their prospects.

(Editing by Matthew Driskill)

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