Dispatch (Asia edition)
| by Peta Tomlinson, Nazatul Izma Abdullah, Sonia Kolesnikov-Jessop 07 Apr 2008 Topic: News |
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Business confidence in Hong Kong and China is among the most optimistic in the world, separate surveys reveal. PwC's 11th annual CEO survey, released in February, found that 73% of respondents in China/Hong Kong are very confident about revenue growth over the next 12 months, compared to 50% globally. The latest findings of leading accounting, tax and business advisory firm, Grant Thornton International, concur. Initial results from its International Business Report 2008 show that 82% of Hong Kong private business owners have confidence in the local economy for 2008, up from 69% in 2007 and 61% in 2006. Business confidence in Mainland China scored 77%, and even though this was down from 86% in 2007, Chinese businesses still ranked the eighth most optimistic this year among all 34 economies that participated in the survey. In December, the American Chamber of Commerce in Hong Kong (AmCham) announced that US companies had given a strong vote of confidence to the city's business outlook. Its annual survey revealed that many members were preparing for growth and further investments in Hong Kong over the next three years. Those companies with regional headquarters in Hong Kong were planning to expand their presence, AmCham reported. Overall, the PwC survey found that confidence among CEOs across the Asia Pacific region continues to gather strength at 56%, up from 49% in 2006. This reflects the fact that many local companies continue to be the engine of economic growth, which has been driving the region's economic prosperity for more than a decade. The optimism in Asia Pacific is not the same for CEOs globally, whose confidence levels have declined for the first time since PwC's 2003 survey. Fifty percent said in 2007 that they were 'very confident' about revenue growth over the next 12 months, compared to 52% who stated such in 2006. PwC expects that China will continue to power ahead in merger and acquisition (M&A) activity this year, led by the domestic sector. This would build on the momentum of 2007, when domestic deal flow was twice as much as foreign direct investment, previously the key driver of M&A growth. In what was billed as a political tsunami by local media, the Opposition coalition parties swept into power in five states, while the establishment Barisan Nasional (BN or National Front) Government lost its entrenched two-thirds majority for the first time in four decades to end up with a simple majority in Parliament, in Malaysia's 12th general elections. Although BN retained power, winning 140 of the 220 parliamentary seats and securing majorities in several states, and Abdullah Ahmad Badawi was sworn in again as Premier, the shift in the political landscape unnerved foreign investors and rocked the market. The Kuala Lumpur Stock Exchange plunged by more than 10% on the Monday immediately following elections due to concerns on government-linked companies (GLCs) and the fate of mega projects announced during the previous Government's regime. Hard-hit stocks included government-linked construction companies Malaysian Resources Corp Bhd (MRCB) and UEM World Bhd, which are involved in the Monorail and Second Bridge projects in the prosperous Opposition-held state of Penang and property developer Equine Capital Bhd, linked to the controversial Penang Global City Centre project. Other affected stocks were Kumpulan Perangsang Selangor Bhd (KPS) and Puncak Niaga Holdings, which have interests in the water treatment sector in Selangor, another wealthy and populous state which fell to the Opposition. Since then, the political flux has continued to pound stocks, and the situation is exacerbated by jitters about a pending US recession. However, the Prime Minister has reassured investors that Malaysia's business and investment friendly policies would stay and that federal projects still had the green light. Nevertheless, it remains to be seen if projects in Opposition-controlled states might be delayed or even derailed, since there have been signals that contracts affecting these states might be reviewed if they were awarded by executive fiat, through political connections or closed tender or, in other words, via a less than transparent process. Singapore's fast growing private banking sector could be a significant beneficiary from the Liechtenstein tax evasion investigation, private banking sources say, although how much money will actually flow in the direction of the city-state is hard to quantify at this stage. 'I expect several hundreds of millions of dollars will move to Singapore as a direct result,' said Daniel Truchi, the global head of Société Générale's private banking business, describing the recent events in Liechtenstein as 'an earthquake for European private banking'. In February, the German tax authorities confirmed they had paid a former LGT employee ?4.2m for records he had taken from the bank in 2002, and which contained the details of some 1,400 clients. The German authorities have used the information to mount a high profile tax investigation. Some European tax authorities now want to use the Liechtenstein breakthrough to push Brussels into a wider crackdown on tax havens in places such as Monaco and Luxembourg. Liechtenstein, Monaco and Andorra are classified as 'unco-operative tax havens' by the Organisation for Economic Co-operation and Development, which also names Cyprus, Panama and Singapore as offshore centres that have significant restrictions on access to bank information for tax purposes. Because the LGT incident appears to have undermined client confidence, the effects will be felt in other European wealth management centres, including Switzerland and Luxembourg, Truchi predicted. Singapore stands to benefit considerably because it has the most stringent and punitive laws for bank secrecy, while its trust laws governing inheritance are among the tightest in the world. A breach in banking secrecy here can be punishable by a prison sentence, instead of just a fine, as in say Switzerland, bankers pointed out. Singapore is under growing pressure to ease its secrecy rules, and the issue has emerged as the main stumbling block in a free trade agreement the EU and Singapore are currently negotiating. But George Yeo, Singapore's Foreign Minister, recently stressed that the country was not a tax haven but a 'low-tax country'. He also made it clear that the secrecy laws were 'very important' to the country, indicating they were here to stay. Bursa Malaysia data indicates that the number of initial public offerings (IPOs) in Malaysia coming to market since 2005 has declined drastically, with many companies opting to list abroad in more flexible markets. According to the stock exchange's data, reported in The Edge, the number of IPOs fell to 28 for 2007 from 40 in 2006 and 79 in 2005, whereas the number of annual IPOs has declined by about 68.2% from a decade ago. The falling numbers were attributed to a trend among Malaysian companies to list abroad on more liberal bourses such as the London Stock Exchange's AIM and Singapore Exchange's Catalist for fast growing companies. Other deterrents include low valuations in comparison with the rich price-earnings ratios that come from listing abroad and a preference to take companies private or go the merger and acquisition (M&A) route, compounded by stiffer regulations to ensure only quality companies were listed on Bursa. In 2006, 40 IPOs out of a total application of 71 were rejected, whereas 51 out of a total application of 124 companies were rejected in 2005. Twenty-six IPOs were approved in 2007, while three were rejected. Other obstacles to local IPOs include the stringent disclosure-based regime that calls for listed companies to be more transparent. However, the trend of declining IPOs is expected to reverse, thanks partly to the Securities Commission relaxing its listing requirements recently. As of March 2008, there have been six IPOs, three on the Second Board and three on the MESDAQ market, and more are in the pipeline. Australia's record-breaking era of merger and acquisition (M&A) activity will be stalled this year by external forces, Ernst & Young predicts. The nation's robust economy and sheer weight of investment funds will not be enough to stop the credit squeeze, market volatility and global economic sentiment having an impact, says partner John Allerton. Ernst & Young's 2007 M&A Index confirmed that Australia hit a record high last year. The value of deals totalled nearly A$54bn and the average premium over net assets increased 9% on 2006 levels. 'We are now seeing the emergence of a two-tiered M&A market,' said Allerton. 'Most top-end deals - those worth A$1bn or more - are now on ice because of the global liquidity crisis, with these deals typically financed primarily with global debt. This is having a significant effect on the global M&A market and Australia will not escape the downturn at the top end.' His sentiment seems widely held. 'You'd have to be an optimist [to believe] that, in 2008, M&A activity will be higher than it was in 2007,' Robert Bazzani, KPMG's head of mergers and acquisitions, told The Australian. Even some lawyers are doubtful that the high value deals of 2007 could be replicated this year, Lawyers Weekly reported. It quoted Freehills partner, Braddon Jolley, as saying that although Australia, like the rest of the Asia Pacific region, has remained relatively protected from the credit crunch, its deal values could still be affected. 'I think you'd probably find that those really big deals are less likely this year, certainly until confidence returns,' he said. The financial services advisory firm, Ipac, agrees Australia's M&A activity is likely to remain subdued in the aftermath of the credit crunch, but says liquidity may improve. Ipac foresees sovereign wealth funds - historically invested in fixed interest - as a new focus of attention for market liquidity. 'Following the surge in the price of oil and other commodities, sovereign wealth funds in Asia and the Middle East have poured tens of billions of dollars into a range of companies and assets,' Ipac noted. 'With global oil markets remaining tight and spare capacity limited, sovereign wealth is expected to grow, which suggests continued demand for a wide range of long-term investments.' Accountants' salaries across Asia increased by up to 20% in 2007 as employers seek to secure or retain their skills, according to the first Hays Salary Survey for Asia. The survey compared salaries across Hong Kong, Singapore, China and Japan. It found that positive economic conditions, strong business activity and increased career opportunities at all levels are ensuring Asia remains a market of choice for regional and international commercial finance candidates. Demand for qualified specialists remains strong within multinational and listed global organisations, as well as local companies. According to Matt Underhill, managing director of Hays Asia, mid-level finance professionals recorded the highest pay increase within the profession (15%-20%), while those at senior level achieved a 12%-15% raise. Professionally qualified candidates across the board are highly sought after, Underhill said. Audit remains the number one hotspot of demand, particularly at the senior and management levels. In Hong Kong and China, demand is greatest for senior tax professionals and financial services advisers. With many corporations relocating their finance function to the Chinese Mainland, Hays notes that accountants willing to travel to China and regionally can take advantage of newly created roles for finance managers and controllers. Commerce and industry's main hotspot is for IFRS/US GAAP/Sarbanes-Oxley/Basel II specialists in light of ongoing business expansions across the region. Hays also notes employers are increasingly seeking candidates for internal audit, in particular those with systems audit experience within financial services. 'The biggest single factor [they are looking for] seems to be those candidates that can demonstrate a good track record of success and tenure, rather than those that are job hopping for the sake of increments,' said Underhill. Going forward, Underhill expects accountants' salaries in Asia will continue to head upwards, particularly within the financial services and fast moving consumer goods (FMCG) markets. 'There is significant investment in the region, with many companies relocating back office functions to Asia. Those specialist candidates in particular at the more senior end can expect to be highly sought after, and for salary premiums to match.' in brief...
Taxes hurt business
Record graduate intake
Environmental initiative
Government releases office space
Revised unit trust guidelines
House prices to rise 10%-15%?
Job market booming
China to co-operate on SWFs | |