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Seven core messages - Southeast Asia Capital Confidence Barometer: April 2012 - October 2012 - EY - Singapore

Southeast Asia Capital Confidence Barometer, April 2012 - October 2012

Seven core messages

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What is your perspective on the state of your local economy today?

What is your perspective on the state of the global economy today?

What is your perspective on the state of the global economy today?

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

What is your current debt to capital ratio?

Number of respondents who expects to pursue acquisitions in the next 12 months

Please indicate your level of sentiment in the following drivers of confidence at the local level

Which are the countries in which you are most likely to invest?

What are the most significant challenges facing your business in light of the eurozone crisis?

With regards to employment, which of the following does your organization expect to do in the next 12 months?

Intra-Asia-Pacific cross border activity as well as inter Asia-Pacific cross border activity is increasingly perceived as a barometer for the global community’s economic health.

In the 6th global survey, we found economic outlook, optimism, business health and willingness to divest or engage in M&A activity varied by market cross Asia-Pacific.

Which markets are likely to pursue acquisitions in the next 12 months?

Singapore Indonesia Malaysia Mainland China South Korea Australasia
58% are likely 35% are likely 50% are likely 22% are likely 4% are likely 32% are likely



Intra-Asia-Pacific cross border activity as well as inter Asia-Pacific cross border activity is increasingly perceived as a barometer for the global community’s economic health.

In the 6th global survey, we found economic outlook, optimism, business health and willingness to divest or engage in M&A activity varied by market cross Asia-Pacific.

Which markets are likely to make asset sales or divestments in the next 12 months?

Singapore Indonesia Malaysia Mainland China South Korea Australasia
33% are likely 43% ar likely 35% are likely 9% are likely 12% are likely 23% are likely





Growth continues to be a key focus for Southeast Asian corporates.

Southeast Asian respondents remain focused on growth and cautiously optimistic about the future of their local economies. The core of this confidence is driven by Indonesia reaching investment grade, positive sentiment in markets such as Philippines and Thailand, stable and consistent expectation in all of the other markets and growing economic affluence in Asia.

Continuing confidence in Southeast Asia

The sentiments among Southeast Asian respondents on local economic conditions have improved compared with our last barometer. While those believe the economic conditions are declining have increased slightly to 22%, the overall sentiment continues to remain predominantly positive.



Winds of change – towards cautious global optimism

There is a significant improvement from the last barometer where 58% of respondents now perceive the global economy to be stable or improving.

The level of confidence among Southeast Asian respondents has also improved across a number of other aspects compared to six months ago. Southeast Asian respondents expect improvement in credit availability, corporate earnings, and employment growth. All of these underpin a more positive outlook in corporate confidence.

Despite the improved sentiments among Southeast Asian respondents they appear to be more cautious compared with Global respondents.





Clear expectations from corporate capital agenda

Growth continues to be a key focus for Southeast Asian corporates. Consistent with our last barometer in October 2011, 56% of Southeast Asian respondents expressed their businesses are focused on growth. Another 36% expect their business focus is to maintain stability.

These sentiments coupled with continuing economic stability and growth prospects across Southeast Asia has resulted in a growing focus on capital optimization activities through increased borrowing and better leverage on corporate balance sheets.



Conservative appetite for mergers and acquisitions

Despite improved fundamentals such as healthy cash reserves, adequate credit access and improving economic confidence, the M&A market continues to be restrained by conservatism. Only 48% indicated they expect to pursue acquisitions in the next 12 months, a 5% reduction compared with October 2011.



Strong appetite to invest into Asia Pacific

Asia Pacific is still the top investment region for both Global and Southeast Asian respondents. Among the Southeast Asian respondents 79% prefer to invest into Asia Pacific region driven by the continued economic prospects in these markets.

Within Asia Pacific, there is an improved interest in Southeast Asia since the last barometer amongst Global as well as Southeast Asian respondents. Southeast Asian markets now account for 6 out of the top 10 countries in Asia Pacific that corporates prefer to invest.



View on divestments

Most Southeast Asian corporates are recognizing the continuing interest in the region as an opportunity to optimize their portfolio rationalization and exit from non-core businesses. One-third of Southeast Asian respondents view they will undertake divestments over the next 12 months compared with just 22% six months ago.



Common challenges for businesses

While the overall fears of a European default may have subsided, companies continue to expect headwinds for their businesses arising from the situation in Europe. Southeast Asian respondents identified revenue margin pressures, credit availability and supply chain risk as three main concerns for their businesses.

Forty-one percent of Southeast Asian respondents plan to implement cost reduction policies in their businesses to mitigate pressure of profitability and 31% expect to counter the headwinds with opportunistic M&A strategy.



Continuing growth in labor market

With improved or stable market prospects and growth as the number one priority, 42% of Southeast Asian respondents expect to create jobs and increase their workforce.

However, influenced by the Malaysian respondents, the percentage of those who expect to reduce the workforce increased to 14% compared to six months ago.

Singapore respondents were among the most bullish when it came to hiring, with 50% indicating they are likely to increase their workforce over the next 12 months.



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