6th Southeast Asia Capital Confidence Barometer, October 2013

Growth back in focus

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Breaking the trend of the past 12 months, there is clear shift in attitude in corporate SEA in wanting to invest and grow. 55% of SEA respondents say that they see growth as their top priority.

What has been opted for is a more balanced approach to growth where emphasis is placed both on organic growth as well as inorganic growth through acquisitions.

When it comes to managing their capital agenda activities, the more cautious capital optimization strategies have given way to capital investment. 50% of SEA respondents say that investing capital to fuel growth is dominating their capital agenda decision making.

This shift in trends perhaps is signaling a willingness to make balance sheets work more towards mitigating any risk on corporate earnings.

Which statement best describes your organization's focus over the next 12 months?

EY - Growth expectation chart

Source: Capital Confidence Barometer, Southeast Asia, Outlook October 2013 – April 2014

Growth has climbed back the priority ladder

55%  

of SEA respondents have firmly identified growth as a priority compared with just 39% six months ago.

This is a significant reversal in the trend of a falling rate of respondents who felt that growth is a priority over the past two years. Maintaining stability which was seen as a focus, is seen by many not as an acceptable option over the next 12 months given the continued growth expectations in the region.

Organic growth is expected to center around rigorous execution of strategies relating to core products and services. Cost reduction continues to remain consistently high on the agenda.

Excess cash will primarily be used to fund growth and pay down debt

58%  

of SEA respondents with excess cash plan to invest on growth over the next 12 months

When funding growth, striking the right balance between organic and inorganic growth has clearly become a focus with nearly half of these respondents say that they will invest to fund inorganic growth. In addition to funding growth, using excess cash to pay down debt is also gathering momentum. However, the balance between investing excess cash to finance growth versus returning to stakeholders remain fairly consistent over the past 18 months.

Investing capital is driving the capital agenda

61%  

of SEA respondents see capital allocation as a priority focus of their Boardroom agenda – a consistent sentiment over the past 12 months.

With growth being the focus, nearly half of all SEA respondents say that investing capital is the top priority that is driving their capital agenda. This is a clear shift in attitude to managing capital - where a more cautious capital optimization strategy was the focus for the past 12 months. With positive economic sentiment driving balance sheets to work harder to create value, investment and growth has started to gain more attention from SEA corporates.