Chief financial officers (CFOs) of Indian companies are the most optimistic lot in Asia, a survey by US investment bank Bank of America Merrill Lynch (BofA-ML) said. The survey brought together responses from 465 CFOs across seven countries – Australia, China, India, Hong Kong, Japan, Korea and Singapore.
Indian finance chiefs are more bullish than others on their companies’ prospects in terms of revenue and profit. They are also, relatively less worried about global macro-economic concerns
An overwhelming 77 per cent of Indian CFOs say they expect revenue to grow in 2012 and 68 per cent expect a growth in profits this year. “Despite consensus expectation for flat economic growth in 2012, the majority of CFOs in Asia still expect their companies’ revenues to grow this year. ...While 58 per cent of CFOs in Asia expect revenues to increase in 2012 fewer (52 per cent) forecast rising profits. This indicates some companies are sacrificing profit margins to obtain greater market share,” the BofA-ML CFO Outlook Asia 2012 report, based on the survey, says.(Click here for charts)
“In Asia, where the impact of the crisis was less severe than in Western economies, CFOs report they are upbeat on their own revenue expectations – but they are far from complacent where economic factors are concerned, and confidence in the economy today is tempered by caution about the year ahead,” Matthew Koder, head of global corporate & investment banking, Asia Pacific, BofA-ML, says in the report.
Asia’s CFOs are particularly worried that the events in the West may have a negative impact on the business scenario. On scale of 1 (no concern at all) to 10 (significant concern), the European debt crisis gets an average score of 7.7, making it the top concern. The next most pressing concern is the issue of US budget deficit at 7.4.
However, on both these counts, India is the least worried. India’s CFOs give a grade of 6.1 to the European crisis and 6.4 to the US budget deficit. All other countries rate these concerns 7 or higher. BofA officials say the recent rally in the stock markets would have boosted sentiments further.
Asit Bhatia, managing director, global corporate and investment banking group-India, Bank of America says, “The market has seen a sea change ever since the survey was conducted. When we do the pulse survey in the middle of the year, the outcome could be even better, if this rally sustains.”
On the overall economic situation, the survey says the officials are relatively positive about the current state of Asia’s economy, giving an average score of 5.9 on a scale of 1 (extremely weak) to 10 (extremely strong).
In contrast, they hold a more cautious view of the world economy, giving an average score of 4.7. The survey also grapples with the issue of whether the economic performance of Asia can decouple from that of the developed markets, an issue that has been contested for many years. “Although the survey shows CFOs are more positive about Asian economies than the developed world, they do believe that the region would be negatively impacted by a global slowdown. The survey results indicate some level of support for this theory from Asia’s CFOs – at least where current economic conditions are concerned,” the report says.
CFOs expect more growth to come from the emerging economies than from the developed economies. After Asia, South America’s CFOs expect to see most revenue growth with 40 per cent expecting growth in India. They are followed by Africa (34 per cent), West Asia (32 per cent) and Eastern Europe (31 per cent).
