JEDDAH: Middle East chief financial officers are very optimistic compared to CFOs in the West, the latest Deloitte Global CFO survey showed. Though the general level of optimism dipped slightly to 52 percent from 55 percent in the first quarter survey, the outcome is still high compared to the general level of optimism among CFOs of Western countries such as the UK and North America. A majority of the CFOs in the region are also planning to take on more debt. Two-thirds of CFOs plan to raise financial leverage over the next 12 months and are likely to issue debt or arrange new facilities in the coming year, Deloitte said in a statement. "This feeling of optimism is reflected in the region generally with plans for growth moving ahead and GDP expected to continue to increase in the coming year," said James Babb, partner and CFO Program Leader for Deloitte. "This positive climate is being supported by strong spending on infrastructure development from the region's governments, underpinned by resilient oil prices." The survey noted that CFOs are now significantly less risk averse than any time in the past year. A net balance of 43 percent think now is a good time to take greater risk onto their balance sheets, compared to 36 percent in first quarter 2010 and 27 percent in third quarter 2009. Besides, companies are not planning to reduce spending and investment as aggressively as they did in the previous quarters, it added. Moreover, while most CFOs become more positive about debt levels and their debt repayment ability, only a net balance of 29 percent of CFOs now think Middle Eastern companies are overleveraged compared to 42 percent in Q1 2010. "Despite a slight fall, bank borrowing continues to be the most attractive source of financing for CFOs. A net balance of 41 percent rate bank borrowing as attractive compared to 28 per cent for equity issuance and 26 percent for corporate bond issuance. There has been a sharp rise in the attractiveness." On mergers and acquisitions, majority of CFOs were optimistic in the next 12 months, though the survey showed a drop, with only 61 percent of CFOs now expect M&A activity to increase in the next 12 months, compared to 71 percent a year ago. Almost a quarter of respondents are considering M&A activity over the next 12 months, with 23 percent considering a strategic alliance and 21 percent considering a joint venture. The recent HSBC Gulf Business Confidence Index also revealed an upward trend, rising 0.8 points to a regional level of 87. Around the Gulf, "confidence remains strong", with Qatar coming first, Saudi Arabia in second place and Bahrain, Oman and Kuwait reporting increased levels. The UAE also continues on the upward trend of the past year as gradual recovery continues at a steady pace. "Gulf businesses remain confident" about revenue growth, as well as the "health" of profit margins, and their ability to meet quarterly budgets and annual targets, HSBC noted. Employers are also looking positive, with 42 percent looking to increase the number of staff over the coming quarter, against 39 percent last quarter, and a drop in expected layoffs from 13 percent to 11 percent, it added.
