6th Southeast Asia Capital Confidence Barometer, October 2013

Wide access to credit but low debt appetite

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Strong balance sheets are here to stay with 50% of SEA respondents expecting to maintain their gearing level at less than 25%.

In an environment where SEA respondents say that they want to invest in growth and access to credit is expected to increase this is a conservative strategy. Or is it a reflection of the strength in reserves and cash that companies have built up over the past few years?

These are good signals. Considering the sentiment in many SEA markets about US easing its quantitative measures, SEA corporates appear to be able to remain focused on their growth strategies in the region.


of SEA respondents say that access to credit is either stable or is expected to improve.

Strong balance sheets with low gearing to continue

Yet relative to global respondents, SEA corporates are less reliant on debt funding, especially in markets such as Malaysia, Singapore and Vietnam. 50% of SEA respondents indicate their debt-to-capital ratio are less than 25% and 55% expect their company's debt-to-capital ratio to remain unchanged over the next 12 months. There is also an increased appetite to pay down debt using any excess cash. So the discipline of maintaining strong balance sheets with low gearing is here to stay.

One in three SEA respondents expect to refinance their debt

A third of those who expect to refinance are motivated to do so to retire maturing debt, while 35% are seeking to optimize their capital structures and lower their borrowing costs.

With stable access to credit and emphasis on growth, one would expect to see companies increasing debt to optimize their overall cost of capital. But conservatism and low debt appetite continues to prevail in SEA as strong balance sheets and reserves continue to get deployed to finance growth.

What is the likely primary source of your company's deal financing in the next 12 months?

EY - What is the likely primary source of your company's deal financing in the next 12 months?

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

More deals are funded through debt


of SEA respondents say that they expect to finance deals through debt compared with 24% six months ago.

With steady access to credit and an increased appetite to take on larger deals, there seems to be a shift towards leveraged financing of deal activities among SEA corporates. Compared with the overall sentiment to maintain balance sheet gearing low, this seems to be more about shifting existing loans towards funding deals as opposed to increasing overall corporate debt.

Key country findings



Singapore respondents are more upbeat regarding growth predictions in their market. A stable political environment, improving sentiment on economic growth, employment growth, corporate earnings and strong corporate balance sheets are driving Singapore respondents to implement their growth ambitions.

Singapore respondents are strongly focused on growth. With good deal fundamentals, access to credit and strong corporate balance sheets, one can expect to see more deal activities over the next 12 months.




Operational efficiency rather than growth has taken center stage in corporate strategies for Indonesia respondents. This seems logical given the more conservative economic expectations leading up to the elections next year. 35% of Indonesia respondents expect their local economy to decline over the next 12 months influenced by similar sentiment. Access to capital, particularly debt financing is expected to deteriorate.

Given this backdrop corporate focus is more towards cost reduction and capital optimization activities. Despite the conservative outlook predicted by Indonesia respondents, the country remains a strong attraction for inbound investors given its low cost base and large domestic market.




Just 19% of Malaysia respondents expect their economy to improve over the next 12 months, down from 60% six months ago. Given the economic outlook, Malaysian corporates have shifted focus from growth to more risk averse strategies. Capital optimization is the top priority for driving their capital agenda activities. Corporate balance sheets are expected to improve and refinancing activities to decline.