Asian CFOs Holding Back on Investment Spending Due to Political Uncertainties

The latest Duke University/CFO Global Business Outlook finds that Asian optimism averaged 65 out of 100 this quarter, ranging from 40 in Singapore, 48 in Japan and 55 in Malaysia to 65 in India and 70 in China.

Two-thirds of Asian CFOs indicate they are holding back on investment spending due to political risk in their countries, though capital spending should rise by an average of about 5.5 percent over Asia. No spending growth is expected in Japan.

Wages should rise by a modest-by-historic-standards 4 percent in Asia, with growth of less 3 percent in Japan versus 5 percent in India. Full-time employment will be flat across Asia.

Top concerns of Asian CFOs include economic uncertainty, government policies, difficulty attracting and retaining qualified employees, and productivity.

U.S. CFO sentiment

In the U.S., more than a third of CFOs say political uncertainty will put the brakes on their spending plans beyond the election, which could create a significant drag on the economy, a new survey finds.

The survey found 40 percent of CFOs say they will hold off on investment if Hillary Clinton is elected. About 33 percent say the same about Donald Trump.

“It is surprising to hear a fair number of business leaders say they will continue to wait and see after the election, until it becomes clearer how the new president and Congress will lead,” said John Graham, a finance professor at Duke’s Fuqua School of Business and director of the survey.

“We’re accustomed to seeing investment falling in the September before an election, but that uncertainty usually dissipates on Election Day and investment levels return to normal in December. This year, the dampening effect of political uncertainty will continue past Election Day.”

Europe CFO sentiment

Over in Europe, 31 percent of European businesses say it would be best for their firms if Britain makes a slow exit from the European Union. Thirty percent of European CFOs believe that Britain will complete the exit by the end of 2019; 54 percent say it will happen by the end of 2020.

Twenty-seven percent of European firms say their UK-based revenues will fall after Brexit. Among these firms, the proportion of revenues coming from the UK is expected to fall from 22 percent to 14 percent.

One-in-five European CFOs believe that another country will vote to withdraw from the EU within two years. The leading candidates are Denmark, the Netherlands, Hungary and Greece.

 

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