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HONG KONG -- (Business Wire)
Asia Pacific’s leading chief financial officers (CFOs) are increasingly
optimistic that revenues will rise in 2014 compared to last year, but
are less optimistic on the outlook for profits.
In a survey of regional CFOs commissioned by Bank of America Merrill
Lynch, 76 percent of respondents said they expect revenues in 2014 to
rise, up from 72 percent in the same survey last year. However, just 60
percent of those surveyed expect profits to rise, down from 65 percent
in 2013.
“Margin pressure is a real issue this year given the rising costs of
doing business,” said Steven Victorin, head of Asia Pacific Corporate
Banking and Global Corporate Banking Subsidiaries at Bank of America
Merrill Lynch. “Costs associated with labor, materials and financing
have been rising as the Fed normalizes its monetary policy through
tapering of its quantitative easing program. Long-term rates may go up,
and certain countries – such as India and Indonesia – already have hiked
interest rates. We also have seen depreciation of some currencies last
year, which equates to rising imported material costs.”
The Bank of America Merrill Lynch 2014 CFO Outlook Asia report surveyed
639 CFOs and other senior financial executives in the region. Close to
60 percent of them represent corporations with annual revenues of US$1
billion and above.
Now in its third edition, the report offers insight into the strategies
deployed by key financial decision makers across multiple industries and
12 economies, with a 50-50 split this year between respondents from
multinational corporations and large local companies. Interviews were
conducted in Australia, China, Hong Kong, India, Indonesia, Japan,
Malaysia, the Philippines, Singapore, South Korea, Taiwan and Thailand.
Other key findings include:
-
CFOs in the manufacturing sector are the most bullish on both top line
and bottom line expectations: 83 percent expect revenue growth, and 67
percent forecast higher profit this year.
-
Effect of Federal Reserve (Fed) tapering: A minority (41 percent) of
CFOs agree that the end of quantitative easing in the U.S. will lead
to major problems in Asia, while 59 percent have no opinion or
disagree.
-
Financial markets risks top CFOs’ list of concerns for 2014: 36
percent are most concerned about financial markets risks, followed by
operational risk at 25 percent and macro-economic risk at 24 percent.
In the financial markets risks category, CFOs are most concerned about
currency volatility (35 percent), liquidity risk (30 percent) and
interest rate movements (20 percent). Counterparty risk is at the
bottom of the list at 15 percent.
-
Bank borrowing is the top choice for financing despite interest rate
uncertainties: 57 percent of CFOs expect to finance their business
with bank loans, more than doubling the 25 percent in 2013. Appetite
for this mode of financing is highest in the manufacturing sector,
with 66 percent of CFOs planning to use bank loans, followed by 64
percent in pharmaceuticals and 61 percent in the metals and mining
sector. Internal sources of funding or self-funding was favored by 29
percent of CFOs regionwide.
Political change does not seem to pose a threat to business as 86
percent of CFOs think any change will have a positive or no impact on
their business. However, 26 percent rate political unrest as their
highest enterprise risk.
In the space of mergers and acquisitions (M&A), the focus is on South
and Southeast Asia this year, although overall there is a preference for
organic growth over M&A throughout the region. Of those surveyed, 62
percent of CFOs do not plan to participate in M&A activity this year.
Those who do will focus on Southeast Asia, emerging Southeast Asia
(Vietnam, Myanmar, Laos and Cambodia) and India/South Asia. Interest in
China has waned, with only 15 percent of CFOs indicating interest
compared to 24 percent in 2013.
“Investment interest in Southeast Asia and India is holding up, despite
Fed tapering concerns,” said Dr. Chua Hak Bin, head of Emerging Asia
Economics at Bank of America Merrill Lynch. “The tail risk seems to be
China this year, where investors have turned more cautious. Concerns
over shadow banking and more trust defaults will likely weigh on
confidence for the rest of the year.”
To download the Bank of America Merrill Lynch 2014 CFO Outlook Asia
report, please visit http://www.baml.com/cfooutlookasia.
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Contacts:
Reporters May Contact:
Elaine Quek, Bank of America Merrill Lynch,
65.9328.6187
elaine.quek@baml.com
Andrew
Peck, Bank of America Merrill Lynch, 852.6106.0722
andrew.peck@baml.com
Source: Bank of America Merrill Lynch
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