OREANDA-NEWS. June 30, 2015. Chief financial officers (CFOs) in Korea are among the most cautious in the region according to the Bank of America Merrill Lynch 2015 CFO Outlook Asia survey. Weaker-than-expected demand in export markets, reduced export competitiveness and slower household income growth are some of the factors driving this sentiment.

In a survey of CFOs across the Asia Pacific region commissioned by Bank of America Merrill Lynch, CFOs in Korea had some of the lowest aggregate expectations of both revenue and profit growth, and were among the least likely to increase their annual capital expenditure or look to grow through mergers and acquisitions (M&A).

“Korean corporates stand at a crossroads. Despite forecasts for stable overall medium-term growth, momentum has been weaker than expected with both the external environment and domestic outlook deteriorating,” said Jinwook Shin, head of Korea Corporate Banking at Bank of America Merrill Lynch. “As a result, Korean companies are taking a cautious approach in their businesses with regards to investment and conserving cash while also increasingly turning to financial management to improve efficiencies and profitability.”

Key findings include:

  • Muted optimism: Seventy-three percent of Korea CFOs expect revenue growth in 2015, the second-lowest of the 12 countries surveyed and lower than the regional average of 84 percent. Korea was the only country to record a decline in revenue growth outlook on a year-on-year basis (82 percent in 2014).
  • Capex: Forty-one percent of Korea CFOs expect capital expenditure to be higher in 2015 than in 2014, the second-lowest in the region, and significantly below the regional average of 58 percent.
  • Cash: Seventy-one percent of Korea CFOs will use surplus cash to increase cash reserves, up significantly on the 15 percent in 2014. Only 31 percent of Korea CFOs will use surplus cash for acquisitions, compared with a regional average of 38 percent.
  • Financial efficiencies: Sixty-nine percent of Korea CFOs will look to increase profitability through improving working capital, while 63 percent will look to do so through building operational efficiencies. This compares to only 13 percent who will look to do so through non-financial management means of reducing headcount or offshoring production (13 percent).


The 2015 survey also found that Korea CFOs had positioned themselves to mitigate against the financial risks in the year ahead. According to the survey, the top four FX exposures for Korea CFOs were the Chinese RMB, the Japanese yen, the U.S. dollar and the Australian dollar, with 41 percent, 34 percent, 59 percent and 39 percent saying they have significant exposure to these currencies, respectively. However, the survey also showed that Korea companies were hedged against adverse movements in each of these currencies with the exception of the Australian dollar, where 20 percent of Korea CFOs said they had FX exposure that was not hedged.

“Korea has one of the deeper capital markets in the region, and the typical corporate is adept at working with its banking partners to adopt more sophisticated FX strategies and trades in order to manage their currency exposures,” added Shin. “In our interactions, we have seen Korean companies take a more proactive stance to FX management over the last 12 months.”

Reflecting the more cautious view towards the country, Korea saw its ranking as a target market for M&A drop to sixth place from fourth in 2014. Greater China, Japan and Australia were ranked in the survey as the top three destinations for M&A in 2015.

The Bank of America Merrill Lynch 2015 CFO Outlook Asia survey includes the views of 630 respondents at the CFO or CFO-equivalent level within companies’ finance departments. Now in its fourth edition, the survey offers insights into the strategies deployed by key financial decision makers across multiple industries and 12 economies in the region. Approximately 97 percent of respondents come from companies with at least US\\$500 million in annual turnover and represent a mix of multinational corporations and large local companies.

In Korea, 75 companies were surveyed. They were comprised of 22 multi-national corporations and 53 domestic firms. All had annual turnover of more than US\\$500 million with the largest group (24 companies) having revenue of more than US\\$10 billion. The largest group of respondents were from manufacturing (16), metals and mining (17), real estate (9), and telecommunications (13). The agriculture and agribusiness, automotive, banking, construction, education, information technology, logistics, oil and gas, pharmaceutical and retailing industries were also represented.

To download the Bank of America Merrill Lynch 2015 CFO Outlook Asia survey, please click here.

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