CFOs bullish on Asia prospects, but margin pressures hit optimism on profits
Optimism abounds among Asia CFOs but financial concerns are becoming more pressing, according to a new survey conducted by The Economist Intelligence Unit for Bank of America Merrill Lynch’s 2014 CFO Outlook Asia, published today.
More than three-quarters of Asia’s finance chiefs (76%) expect revenues to grow this year, up from 72% in 2013. This figure far outpaces expectations for sales growth in the US 2014 CFO Outlook (54%).
However, optimism on profits is tempered by intensifying margin pressures. The proportion of CFOs in Asia that expects profits to grow has fallen to 60% from last year’s 65%. The survey also reveals 36% of Asia-based CFOs say financial market risk is their single greatest concern in 2014, compared to 22% in 2013. Still, only a minority (41%) agree that the end of quantitative easing in the US will lead to major problems in Asia. Among financial risks, currency volatility is seen as the most serious (picked by 35%, up from 22% in 2013) while liquidity is in second place (29.5%, up from 16%).
Meanwhile just 13% of CFOs are worried that political change in their home countries this year will have a negative impact on their business; 38% across Asia expect a positive impact.
The survey also finds that just 15% of CFOs in Asia with M&A plans this year pick Greater China as a target market, with its ranking falling from first in 2013 to fifth. Western markets are also out of favour, with just 6% focusing on Western Europe for deals this year and 4% on North America. Southeast Asia ranks as the most attractive target for M&A activity in 2014.
David Line, the editor of the report, said: “The survey reveals that Asia is still a wellspring of growth, although CFOs are going to have a tougher time growing profits. It also shows that risks that get a lot of media attention – such as tapering and political change – aren’t necessarily big concerns. Opportunities still outweigh risks by far.”
