Most chief financial officers (CFO) of the nation’s largest companies expect to see an increase in profits this year, according to a report released yesterday by Bank of America Merrill Lynch.
The level of confidence among CFOs is the second highest in the Asia Pacific region after Indonesia, Merrill Lynch said in its 2015 CFO Outlook Asia report.
The report was based on a survey among 630 CFOs and senior financial managers of big companies in 12 regional countries and areas, namely Taiwan, China, Japan, India, Indonesia, Malaysia, the Philippines, Singapore, South Korea, Thailand, Australia and Hong Kong.
Nearly 97 percent of the companies have global annual revenues of at least US$500 million.
Bank of America Merrill Lynch Securities Taiwan chairman and managing director Wayne Liaw said the optimism among local CFOs could be attributed to a steady growth of the economy, improving consumer confidence and a gradual recovery of business confidence in a stable policymaking environment.
However, he said that despite the high level of confidence among the local CFOs, there is still concern over political risk, as expressed by 83 percent of them, the highest percentage among all the Asian countries in the survey.
Taiwanese CFOs, in particular, tend to increase their equity weighting on the balance sheet and build cash reserves, the report said, adding that 80 percent are planning to reserve more cash this year, compared with 67 percent last year.
On the other hand, not many local CFOs are interested in mergers and acquisitions, with only 17 percent planning to use company capital this year for such purposes, a steep drop from 33 percent last year, according to the report.
It said there is even less interest in applying for loans for mergers and acquisitions, with only 10 percent of local CFOs looking in that direction, compared with the average 26 percent among all Asian CFOs.
The Chinese market is still a focal point, the report said, adding that 60 percent of Taiwanese CFOs plan to invest there, although they are closely observing the effects of China’s slowing economic growth and shifting policies.
The report said 80 percent of Taiwanese CFOs think that further easing of currency control in China would benefit Taiwan’s investment environment in the long run.
In general, local CFOs are not overly concerned about a possible increase in US interest rates, the report said.
It said only 13 percent thought that such a move would negatively affect their businesses, while 17 percent suggested that it would have serious consequences in Asia.
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