Chief financial officers in Asia are becoming more optimistic about the economic outlook for 2011, raising expectations for continued growth in capital spending and earnings and for improved job growth. Wages next year are expected to rise 7% in the region.
“The current level of optimism has increased notably from last quarter,” said Kate O’Sullivan, senior editor at CFO Magazine. “U.S. optimism still trails Asia, but this quarter surpasses Europe. Finance chiefs are acting on this improved outlook by boosting their budgets.”
Earnings are expected to rise 10% in Asia, smaller than the 20% jump expected in the U.S. and 14% in Europe.
Optimism in Asia (not including China) is strong, with 72% of CFOs being more optimistic and 10% more pessimistic. The outlook is more restrained in China, with optimists outnumbering pessimists 40% to 22%.
These are some of the findings of the most recent Duke University/CFO Magazine Global Business Outlook Survey. The survey concluded December 10, 2010, and generated responses from 131 CFOs from Asia (not including China) and 100 from China.
The top internal concern among Asian CFOs is difficulty in attracting and retaining qualified employees, with employee morale and difficulty in planning following close behind. Supply chain risk is the No. 4 concern among Chinese companies.
Full-time domestic employment is expected to increase by about 5% in Asia in 2011 and capital spending will rise by more than 10%. Seventy percent of Asian companies will begin to deploy accumulated cash in 2011, with 71% making capital expenditures and 32% spending on mergers and acquisitions.
Sixty-eight percent of Asian CFOs believe their country’s currency will depreciate relative to the U.S. dollar (helping U.S. exports), with an average depreciation of 7%.
Companies around the world say low interest rates have encouraged them to borrow slightly more. The borrowing mix has changed notably, with companies shifting toward long-term, fixed-rate borrowing to lock in low long-term rates. One exception is China, where half of all firms say borrowing has become more difficult, as the Chinese central bank attempts to slow economic growth and dampen potential inflationary pressures.
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