Finance chiefs of companies in the Asia-Pacific region are expecting better revenue prospects this year, but remain cautious about earnings outlooks amid continued margin pressures, according to a Bank of America (BofA) Merrill Lynch survey released yesterday.
Seventy-six percent of the regional chief financial officers (CFOs) polled said they expect growing revenue this year, compared with 72 percent last year, but only 60 percent said earnings would increase this year, down from 65 percent last year, the survey found.
The survey polled 639 CFOs and other senior financial executives in 12 countries and territories.
While Asian financial chiefs’ confidence on sales growth far outpaces that of their peers in the US, where just 54 percent expect sales to increase this year, their optimism is tempered by rising margin pressures triggered by higher operating costs, the US bank’s annual CFO Outlook Asia report showed.
“Costs associated with labor, materials and financing have been rising as the Fed normalizes its monetary policy through tapering of its quantitative easing program,” Steven Victorin, head of the bank’s regional and global corporate banking divisions, said in a statement. “Long-term rates may go up, and certain countries — such as India and Indonesia — already have hiked interest rates. We also have seen depreciation of some currencies last year, which equates to rising imported material costs.”
In Taiwan, 76.7 percent of respondents said they forecast revenues to rise this year, up from 64 percent in the same survey last year.
However, the survey showed the same level of 60 percent of Taiwanese CFOs polled anticipate higher profits this year than last year year, which is on par with the regional average, suggesting that even as revenue expectations soar, it is getting tougher to increase profits in a challenging business environment.
Last year, Taiwan’s 1,506 publicly listed firms saw their revenue increase by 1.83 percent from 2012 and gained 46.93 percent annually in pre-tax income, according to the latest statistics released by the Financial Supervisory Commission on Tuesday last week.
Total revenue for firms listed on the Taiwan Stock Exchange increased 2.06 percent annually to NT$26.84 trillion (US$886.7 billion) last year, with pre-tax income jumping 47.37 percent to NT$1.78 trillion, the data showed.
Meanwhile, firms listed on the GRETAI Securities Market posted an annual decline of 1.66 percent in total revenue to NT$1.75 trillion last year, with pre-tax income advancing 39.53 percent to NT$100.6 billion, data showed.
For this year, regional CFOs see financial market volatility as the key risk to their business, in terms of greater fluctuation of national currency, as well as a greater degree of unpredictability in both equity and fixed-income markets, according to the BofA Merrill Lynch survey.
Compared with regional peers, Taiwanese CFOs appear to have fewer concerns over currency volatility and political change, but their worries about liquidity are relatively higher, with 43.3 percent of them citing this as the single greatest financial risk facing their companies.
The figure indicates Taiwan has the second-highest concerns about liquidity in the region, after South Korea’s 48.7 percent and ahead of China’s 40 percent, “a result reflecting the degree to which Taiwanese businesses rely on operations and sales in China,” the survey said.
In addition, Taiwanese financial chiefs also rate slowing growth in their home market as one of their biggest macroeconomic concerns, cited by 36.7 percent, the second-highest in the poll after 40 percent for Malaysian CFOs, despite improving export demand in the US and Europe.
“Taiwan’s high reliance on exports has created awareness among CFOs — and economic policymakers — of the economy’s vulnerability and a need to expand domestic markets,” the survey said.
Additional reporting by Crystal Hsu