Asia Pacific Companies in 2011

Insights from Fidelity International Analysts

• Another solid year of performance with double digit sales and profit growth expected
• Cashed up and looking to spend - Acquisitions, Capital Expenditure, Dividend Payments
• Inflation, US economy and regulation remain key challenges for all companies

Hong Kong, 21 February 2011:  Asian companies have emerged from the global financial crisis with very strong balance sheets and good revenue growth expectations, with many of them planning to deploy excess cash in 2011 through acquisitions, capital expenditure or dividend payouts, a survey by Fidelity International has found.

A survey of Fidelity’s analysts in the Asia Pacific region provided the insights from some of the world’s leading companies which they follow closely and in which they invest.

“The vast majority of companies meeting with us in the region continue to have very strong balance sheets (63%) and deploying their excess cash through capex, dividends and buy-backs will improve shareholder returns, and make another strong year of market performance more likely,” said Matthew Sutherland, Head of Fidelity’s Asia Pacific research team.

When asked about profit expectations, over 77% of Fidelity’s analysts said the companies they met with during 2010 expect to see sales growth of over 10% in 2011, and 50% of analysts said they expect operating margins to grow in excess of 10% in 2011.

“While this expectation is typical for Asia Pacific companies and in line with previous years, it does once again confirm the fact that 2011 will be yet another year of solid growth levels for companies across the region,” Matthew said.

Across the region, respondents also said the surplus cash they are seeing in Asia Pacific companies is likely to be spent on dividend payouts, capital expenditure or acquisitions. (All three were ranked at 23.50%.)

“Aside from revenue growth, additional benefits will come from an increased willingness of companies to do something constructive with the overly-large cash piles they built up as a reaction to the problems of 2008/9.

“Interestingly, whilst they will spend on capex, capex will not grow as a percentage of sales. More importantly, they are likely to give more back to shareholders via increased dividends and buybacks. We should thus have a year with good earnings growth coupled with higher yields and buy-backs, which makes for much higher total shareholder returns.”

Regulation and inflation were recurring themes of concern faced by companies in 2011.

“The potential fly in the ointment in 2011 is likely to be inflation. It is expressing itself via higher wages and higher raw material costs, and could result in margin expectations being reduced as the year goes on,” Matthew added.  “Having said that though, if there was nothing left to worry about, markets would be at a peak. The fact there is still concerns means that markets may continue to ‘climb the wall of worry’ in 2011”.

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About Fidelity International
Fidelity International provides investment products and services to individuals and institutions in the UK, continental Europe, the Middle East and Asia Pacific. Established in 1969, the company has over 5,400 staff in 23 countries and manages or administers client assets US$309.7 billion as at 31 March 2011. Fidelity has over 7 million customer holdings and manages more than 750 equity, fixed income, property and asset allocation funds. Fidelity’s fund managers receive research from one of the largest proprietary research teams, covering 99% of the world’s largest listed companies. Fidelity International is an independent company which is privately owned.

Media Contacts:

Rowena Kwok
Fidelity International
Tel: 852 2629 2800

Jaime Leung
Fidelity International
Tel: 852 2629 2800