Asian CFOs confident of earnings outlook this year, eye regional expansion

SINGAPORE - Chief financial officers (CFOs) in Asia Pacific are confident about their regional business prospects while eyeing more active expansion this year, the latest CFO Outlook Asia Survey by the Bank of America Merrill Lynch shows.

Eighty-four per cent of the 630 CFOs or equivalent respondents polled by the annual survey expect their revenues to grow in 2015, up from last year's 76 per cent. Another 73 per cent are expecting their companies' profits to increase, also up from 60 per cent in 2014.

But financial risks are still a key issue on CFOs' minds, as Asian currencies continue to be volatile while the interest rate hike by the United States Federal Reserve looms over the horizon.

As a result, 54 per cent of survey respondents see financial risks as their biggest potential issue this year, up from last year's 36 per cent.

Regional CFOs however are well prepared to manage these issues, said Mr Steven Victorin, Bank of America Merrill Lynch's Asia Pacific head for corporate banking.

"Past financial crises have taught the region's most successful CFOs valuable lessons in prudent financial and risk management. As a result, we find that corporations with substantial cash surpluses, closely hedged currency exposure and an actively mitigated interest strategy are more confident in dealing with market challenges and pursuing growth strategies."

In response to concerns of leverage, 53 per cent of regional CFOs are planning to increase their companies' equity weighting on balance sheet, up from 27 per cent last year, even as conditions for borrowing still remain favourable for now.

Meanwhile, regional expansion is also on the cards for regional corporates, as 58 per cent CFOs said they will expand organically, while 37 per cent said they will spend on mergers and acquisitions, with Greater China, Japan and Australia as top M&A destinations.

But Singapore CFOs are showing greater caution on expansion compared to their regional peers, as 80 per cent of local respondents said they are actually considering moving their operations away from China to other locations.

This is resulted from worries over China's slowing economy and rising wage levels, but Singapore CFOs and firms are turning their attention back to opportunities across Southeast Asia as the formation of the Asean Economic Community nears, the survey showed.

whwong@sph.com.sg