Jul. 18 – A survey of over 600 top CFOs across 12 markets throughout Asia by U.S.-based investment institute Bank of America Merrill Lynch has highlighted high levels of confidence in the Asian economies, which is, surprisingly, far higher than current confidence in China and the United States.
The survey concluded that 71 percent of all respondents noted that they expect higher corporate revenues this year, and 62 percent expect higher profits – signs that some profit margins, possibly linked to China, are expected to shrink.
Concerns over Asia were reflected by 37 percent of respondents, citing rising commodity prices as an issue. Meanwhile 22 percent of respondents singled out currency volatility as an area of which to be careful.
Southeast Asia was by far the most bullish in the region, with 90 percent of Indonesian CFOs expecting higher revenues in 2013. For comparison, 86 percent of Thai CFOs and 81 percent of Filipino CFOs, respectively, expect higher revenues this year.
Conversely, North Asia reported lower expectations, with just 54 percent of respondents in Taiwan, Japan, and South Korea predicting higher revenues, and about 50 percent reporting increased profitability.
Percy Batliwalla, head of treasuries at Bank of America Merrill Lynch explained that in general, Asia-Pacific based companies are experiencing a slowdown in exports while strong domestic demand has led to a more optimistic mindset
In regard to the trends, Chris Devonshire-Ellis, Founding Partner at Dezan Shira & Associates, noted: “The report is in line with what we are seeing from clients and our own practice across the region. Companies with substantial exposure to China are seeing some increase in revenues, yet, coupled with profit margin deterioration, there is both revenue growth and improved profitability when in Southeast Asia and India.”
“We feel this trend will become the new norm, and dealing with China exposure will be a major challenge for corporations. We are already seeing divestment from China to Southeast Asia, and companies are now looking towards a more balanced Asian investment strategy,” Mr Devonshire-Ellis added.
You can stay up to date with the latest business and investment trends across Asia by subscribing to Asia Briefing’s complimentary update service featuring news, commentary, guides, and multimedia resources.
Related Reading
Report: China & India to Be Largest Investors in Developing World
Report: Indian Managers More Confident Than Chinese
Asia’s High Net Worth Individuals Concentrated in China & India
