Market sentiment in Southeast Asia hit 2-year high

60% of bosses expect economic improvement.

According to an Ernst & Young release, market sentiments in Southeast Asia (SEA) are at a two-year high as 60% of corporates in the region expressed confidence that the global economy was improving.

This is a clear increase from the 49% who shared such sentiments six months ago, according to the latest SEA issue of the EY Capital Confidence Barometer released today. The survey of over 1,600 senior executives in 72 countries around the world, of which 127 were from SEA (Singapore, Malaysia, Indonesia, Philippines, Thailand and Vietnam), was conducted in September 2013.

In SEA, close to half (48%) of respondents believed that their local economies were improving, up from 39% who held such views six months ago. Confidence levels in Philippines, Thailand, Singapore and Vietnam were high while those in Indonesia and Malaysia were moderate.

Across the region, growth is a given among the executives. A higher proportion of SEA corporates – 45%, up from just 33% six months ago – believed that their local economies would grow by more than 3% in the next 12 months. This confidence is evident as an overwhelming 91% expected to maintain current headcount levels or create jobs in the year ahead.

Shift in strategy as SEA corporates seek growth and investment SEA companies are shifting gears to a bolder corporate strategy. More than half (55%) indicated that growth would be their primary focus over the next 12 months. 58% of SEA corporates shared that they would use cash to fund growth, starting with inorganic strategies.

There is strong evidence that M&A is back on the agenda for SEA corporates. Deal appetites have improved strongly, as 41% of SEA corporates intended to pursue acquisitions in the next 12 months with an interest towards for bigger deals (US$51m and above). This is a marked change from six months ago, where only 25% of SEA respondents were looking to pursue M&As, with expected size of US$50m or less making up the bulk of deals.

Respondents from Thailand and Singapore were most enthusiastic about M&A, where 55% and 50% of them respectively said they were planning to pursue acquisitions. 60% of SEA corporates expected deal volumes to improve over the next 12 months. This aligns current sentiments with deal fundamentals, where the expectations of SEA corporates on the quantity and quality of deal opportunities and deal closure rates, improved compared to six months ago.