You can’t find a more sensitive barometer of Asia’s business prospects than a company like Adecco, which provides personnel and human resources solutions to enterprises across the region. “We always feel the market first,” says Loong Foong Min, head of finance for Asia ex-Japan. This year, companies have trimmed staff numbers in response to the economic crisis and utilising temporary and contract labour where appropriate.
But things are improving. “We’re seeing more [recruitment] requests,” says Loong. “I think companies are more optimistic this quarter compared to last quarter. We are seeing light at the end of the tunnel, but it’s always good to be cautious.”
Optimism and caution – these are the watchwords of Asia’s senior business executives going into the fourth quarter of 2009. The theme pops out clearly in the first CFO Innovation Asia Business Forecast Survey, the first in a series of quarterly surveys sponsored by SAP. Conducted from September 23 to October 9 this year, the study polled 160 CFOs, finance directors, controllers and other senior executives across Asia. (Click here to download a copy of the report; registration is required.)
There’s a bit of a contradiction here. The executive surveyed say their company will embark on aggressive moves in 2010, but it will not increase spending. While the majority, for example, intend to refocus on sales, marketing and distribution, and make a push into new consumer segments and markets in the next 12 months, they will also keep capital spending, R&D and marketing and advertising at current low levels, or even cut back on these expenditures. M&A will also remain at the bottom of their priority list.
Positive on the Economy
This, despite the general optimism about the growth prospects for the economy. Nearly everyone in Asia is positive about their local economy – except Hong Kong. Only 38% of executives who are based in Hong Kong say they are more optimistic about the economy today than they were in the previous quarter. A fifth say they are less optimistic, although 41% believe that the economy will not worsen. This compares with the 60-80% of respondents who are more optimistic or very optimistic in China, India, Malaysia and Singapore.
Why the long face in Hong Kong? Perhaps it’s because there are many export-oriented and trading companies in the city, whose traditional markets in the U.S. and Europe have yet to show signs of life. “I don’t think Hong Kong’s economy will contract [next year],” says MC Wong, Hong Kong-based CFO of California Fitness, a fitness centre chain with clubs in Hong Kong, China, Malaysia, Singapore and Taiwan. “But I don’t see hiring [improving by] a great magnitude, so unless employment is sorted out, it’s not a secure recovery, is it?”
In contrast, optimism in Singapore, a financial centre like Hong Kong, is sky-high. “The first integrated resorts are coming online, Singapore will host the first Youth Olympic Games in 2010, a lot of developments are going on and I think they’ll give the economy a boost,” says Lee Chee Han, Asia finance director for Invensys, a UK technology provider of software and equipment solutions for the energy, rail and appliances industries. “The recent announcements of acquisitions by the local banks, those are all very positive signs.”
Singapore has already hauled itself out of recession when the economy grew 15% quarter-on-quarter in the third quarter of 2009. The optimism may also be fuelled by a recent International Monetary Fund report that upgraded GDP forecasts for Asia in 2010. The IMF no longer sees Singapore contracting next year; instead it projects GDP growth of 4.1%. China will expand 9%, India 6.4% and Malaysia 2.5%. Despite the relative pessimism of the executives surveyed, Hong Kong’s economy will expand 3.5% next year after contracting 3.6% this year, says the IMF.