The Asian Business Optimism Index rose to 62 out of 100, up from 58 last quarter, according to the Duke University/CFO Magazine Global Business Outlook quarterly survey. The increased optimism is primarily due to rising Japanese optimism, which jumped to 60 from 49 last quarter, and to very high Chinese optimism (69.)
Nearly 30 percent of Asian firms expect to make an acquisition this year, and about 40 percent of those will involve foreign targets. Almost all of the cross-border activity will involve acquiring another Asian firm or assets.
Revenues should grow rapidly in 2013 (10 percent), except in Japan where revenues will be flat. Earnings growth will vary widely, from -10 percent in Japan, to +4 percent in China, to +9 percent in the rest of Asia. Capital spending and employment growth will be robust (about 6 percent) outside of Japan.
Employment will increase a more modest 1.6 percent and business spending a robust 19 percent in Japan. Wages are expected to rise 8 percent outside of Japan, but by only 1 percent in Japan.
Top external concerns in Asia include price pressure from competitors, governmental policies, global financial stability and (except in Japan) inflation. Japanese CFOs are also very worried about currency risk. Top internal concerns include maintaining profit margins, attracting and retaining skilled workers, and maintaining employee productivity and morale.
On average Asian firms believe that real economic growth in their country will average 5 percent (1.5 percent in Japan; 6 percent in China) -- but if the U.S. should happen to fall into recession, Asian growth would fall to about 2 percent.
In Japan, CFOs are less optimistic about their own firms than they are about their country overall, a reversal of the usual trend observed in most countries.
Improved optimism about the Japanese economy is most likely in response to a positive reaction in the business community to the policies of the new prime minister. Nearly 80 percent of Japanese CFOs say that monetary easing and fiscal spending will help the overall economy, and 90 percent say the recent depreciation of the yen will help. In contrast, fewer than 40 percent believe these policies will directly help their own firms.