BUSINESS OUTLOOK SURVEY
CFOs in Asia are at their most optimistic in at least two years.
By Don Durfee

Suddenly, it seems, Asia’s investors and CFOs have starkly different views of the future. In late February, Hong Kong’s Hang Seng Index dropped sharply, prompted by the Shanghai stock market’s fall. At press time, the index was still stubbornly below where it was in January and most of February, as investors continued to fret about growth in the US and elsewhere.

Asian CFOs, by contrast, are more sanguine than they have been for at least two years, according to the latest CFO magazine/Duke University Business Outlook survey concluded in early March. Seventy-two percent of CFOs say they are more optimistic about the Asian economy than they were the last quarter, the highest level recorded since we began polling Asian finance executives in 2004.

Much of this optimism surely stems from what CFOs see at their own firms. On average, they expect earnings to grow 13% and plan to boost capital spending by 12.5% in the next 12 months. For some, the improvement will be even greater. Sanjeev Sancheti, CFO of Chennai Container Terminal, expects his company to grow 15% to 30%, citing a surge in Indian exports, which means more work for container terminals.

CFOs do see risks, however, such as rising cost of labor, slower consumer demand, and a scarcity of skilled workers. And while they expect strong growth from India and China, they see cracks emerging. “I’m worried about rising wages here in China,” says Teng Kin Cheong, China CFO for German multinational Forbo Siegling Belting, a producer of transmission belts in Shenyang. But even he expects strong growth for his business, particularly as China spends on airport construction in advance of the 2008 Olympics.

Investors are rightly worried about macroeconomic risks, given Asia’s close links with the US economy. But don’t discount the CFOs: after all, they have a ground-level view of customer demand, which in the end determines business success.