The majority of the nation’s chief financial officers (CFOs) expect growth in revenues and profits this year from last year on the back of an improving business environment, the Bank of America Merrill Lynch said in a report released yesterday.
The annual Bank of America Merrill Lynch CFO Outlook Asia showed 64 percent of CFOs in Taiwan forecast revenue growth this year, while 60 percent anticipate higher net profits.
“We expect Taiwan-based corporations to be more upbeat in the second half, reflecting potential demand spikes in the technology and electronics sectors driven by a more stable global economy,” said Eric Liu (劉昭明), country executive of the US financial services provider.
As credit access remains strong and affordable, 84 percent of CFOs in Taiwan intend to maintain or increase borrowing, the report said.
About 20 percent intend to use the extra funds for refinancing, while 16 percent plan to recapitalize and another 16 percent look for turnaround financing, the report showed.
Despite the vast range of financing options available, Taiwanese CFOs favor traditional sources of finance, the report said.
About 33 percent of companies in Taiwan still rely on traditional bank loans and 11 percent tap into internal sources, the report showed.
While companies use a variety of financing methods, syndicated loans and commercial paper issuance figure strongly at 9 percent and 7 percent respectively, compared to alternative options.
CFOs in Taiwan favor organic growth over mergers and acquisitions (M&A) and 84 percent do not plan to participate in any M&A activity this year, the report said.
Furthermore, 43 percent of Taiwan’s CFOs will focus on improving operational efficiencies in their companies and 20 percent will commit resources to enhance working capital to drive profits, the report said.
On the flipside, 44 percent of respondents in Taiwan identified counterparty risk and currency volatility as risks to earnings this year, the report said.
The conclusions are based on over 600 interviews conducted with financial executives in Taiwan, Hong Kong, India, Indonesia and other markets in the Asia-Pacific region, the report said. Over 50 percent of respondents came from corporations with annualized revenues of US$500 million or above, representing a broad range of multinational, regional and local companies.