Mainland firms take a bright view of future
Mainland companies are the most confident in Asia when considering the shape of their country's economy, according to a survey by Bank of America Merrill Lynch.
More than half of the Asian chief financial officers interviewed said they expected revenues to grow this year, despite the uncertainties in US and Europe. The most optimistic financial heads were based in India, Singapore, China and South Korea. The most pessimistic country was Japan, where fewer than half the CFOs said they expected revenue growth.
On a scale of one to 10, CFOs on the mainland scored 7.5 for confidence in their economy, higher than the average of 5.9 rated for Asia as a whole. Those in Japan were the least upbeat, scoring 4.1.
The survey was conducted among 465 chief financial officers of companies generating more than US$500 million in Hong Kong, mainland China, India, Japan, South Korea, Singapore and Australia, in the fourth quarter of last year.
A third said they expected to participate in merger and acquisitions activities this year, while more than half said they would focus on the domestic market. In mainland China, 86 per cent of the CFOs considering M&As said they would do so at home, while the rest said they expected to take part in overseas acquisitions.
More than 50 per cent of the CFOs in Hong Kong and Singapore said they saw mainland China, rather than their local market, as the top M&A destination.
Matthew Koder, head of the bank's Asia-Pacific global corporate and investment banking, said he was surprised Asian CFOs, especially those from mainland China, did not express a stronger interest in buying up assets in Europe.
The financial heads surveyed said they placed more importance on snapping up market share at home rather than abroad. As a result, CFOs, especially those in Australia, China and India expect purchase prices of firms and assets to soar as competition for these assets heats up.
Overall, 39 per cent said their companies would spend more on capital expenditure this year. CFOs from Australia, China and India were the keenest to lift capital expenditure.
The mainland's CFOs were the most concerned group about cash flow, domestic competition and corporate taxes in the region.