Like Yang, other members of the All-Asia Executive Team must look increasingly closer to home for business as the problems in the West dent exports. They are facing more intense competition at home, however, as rivals from inside the region and without seek to capitalize on Asias dynamism. In the next five years, reliance on external exports will go down gradually, and the Asian economy will depend more on the region itself as the middle class grows, says Cheng Cheng-mount, head economist with Citigroup in Taipei. The International Monetary Fund forecasts that developing Asia will grow by 7.3 percent this year, well ahead of the global average of 3.5 percent, but down from 7.8 percent last year. Growth in the regions largest economy, China, is expected to slow to 8.2 percent in 2012 from 9.2 percent in 2011, but other countries may do better and buck the global slowdown. The IMF projects that Indonesia, Malaysia, the Philippines, Thailand and Vietnam will grow by 5.4 percent, on average, up from 4.5 percent in 2011. Investors should focus on the fact that the Philippines growth prospects are much brighter than those in the West, says David Nicol, CFO of Metro Pacific Investments Corp., a Manila-based infrastructure company that owns road, water and electric power companies and six hospitals. The essence of what is different here is that the opportunity is still significant and unexplored, says Nicol, voted best CFO in the Conglomerates segment by sell-side analysts. The Philippines has historically underspent on infrastructure. It now finds itself at a point where Moodys is disposed to favor the country. And we only pick the best projects. Yet corruption and uneven economic development still pose significant business and perception risks in the archipelago nation of 103 million people. Some 40 percent of Metro Pacifics investors come from abroad, mostly from Europe and the U.S., and investors often ask about the impact of presidential administration changes and the professionalism of local regulators, says Albert Pulido, head of investor relations for the company. You dont have to sell Germany or the U.K., says Pulido, who ties for the most sell-side votes for top IR manager in the Conglomerates segment. But, he notes, here we have to sell the country. We try to be upbeat, yes, but also factual. You lay out the pitfalls, so [investors] dont think youre being overly optimistic. Asias good economic health poses challenges as well as opportunities for many companies. Piyush Gupta, CEO of Singapores DBS Group Holdings, believes the regions consumers will increasingly share the fruits of growth with producers. Asia in the next ten or 20 years is going to be a lot different from the last 20, says the 52-year-old CEO, ranked No. 3 in Banks by buy-side analysts. Gupta notes that most Asian banks have stronger capital and liquidity positions than their Western counterparts, which should help them win customers from retreating rivals. But he cautions that growth could bring problems if banks arent careful. We need to become more thoughtful about which clients to bring on, Gupta says. What we dont want are people who are being exited by other banks winding up with us, and we in turn wind up with an adverse selection of customers. DBS has posted nine straight quarters of earnings growth, with more than 3 billion Singapore dollars ($2.34 billion) in net income for 2011 the highest ever for a Singaporean bank but it is taking nothing for granted. The bank now stress-tests its portfolio to guard against deterioration. Gupta also emphasizes DBSs conservative approach to dealing with problem loans. Borrowers are still current on their payments on 37 percent of the loans that DBS classifies as nonperforming, which total 1.3 percent of its overall portfolio, and the bank holds loan-loss provisions equal to 128 percent of nonperformers. During the past decade Southeast Asian banks, on average, have classified 5 percent of their loans as nonperforming and maintained provisions equal to 56 percent of those, according to a study last April by the Bank for International Settlements. DBS has also recently improved its liquidity, with deposits growing almost twice as fast as loans in the first quarter of 2012. The bank has increased its income from wealth management, a relatively stable and low-risk business, by 66 percent during the past two years. Asian companies dependent on global markets are having to adjust quickly to todays tough business climate. At Infosys, CEO Sarojini Shibulal found that some of the Bangalore, Indiabased software services providers offerings were becoming commoditized, while turmoil in the euro zone was hurting many of the groups key customers in financial industries. In response, Shibulal, voted the No. 2 chief executive in the Technology/IT Services & Software segment by buy-side analysts and No. 3 by sell-side analysts, has shifted gears to focus more of the companys efforts on high-margin work like IT consulting and less on such low-margin undertakings as application maintenance. We are not able to differentiate in some parts of our business, and our clients are looking for higher and higher value, says Shibulal, an Infosys co-founder who has spent more than 15 years abroad to learn what clients want. To meet the growing demand for increasingly sophisticated IT help, particularly among infrastructure and finance clients, Infosys increased its staff by 16 percent fully 45,000 people in 2011. Im not afraid of change, Shibulal asserts. I take risks. Uncertainty has Lora Ho, CFO of Taiwan Semiconductor Manufacturing Co., spending much of her time analyzing all manner of variables that could impact use of its annual chip-manufacturing capacity of 13.2 million 8-inch equivalent wafers. The 57-year-old CFO, whom buy-side analysts voted No. 1 in Technology/Semiconductors, notes that the companys products have both short life cycles and heavy capital needs. You need to react very fast to environment changes, she says. If the timing window is wrong, it can be wrong for a long time. Since Ho joined the chip maker, in 1999, it has compiled in-house forecasts every week unusually frequent for the industry which it then uses for quarterly investor guidance on orders, inventory and customer demand. Ho says Taiwan Semiconductor has since changed its forecasts only twice: in late 2008 and early 2009, in the midst of the severe global recession.
Other members of the All-Asia Executive Team have had to make much bigger adjustments. Pacific Basin Shipping, the largest dry-bulk shipper in Hong Kong, with a market capitalization of HK$6.31 billion ($814 million), has sought to ride out the downturn in the world economy by continuing to sell many of its vessels, used to ship coal, grain, metals and other commodities. Now chartering half of its 210-ship fleet instead of owning 75 percent as it did before 2007, Pacific Basin earned HK$32 million in profit in 2011. That was 69 percent less than a year earlier, reflecting the impact of the weak global economy, but Andrew Broomhead, CFO since 2003, insists things could have been worse. We were fortunate to sell a significant number of vessels ahead of the global financial crisis, says Broomhead, voted best CFO in the Transportation segment by sell-side analysts. Now we are looking to put some of that cash back to work through purchasing vessels at the right time. The slowdown in global trade has also affected China Merchants Holdings (International) Co. The state-controlled company and largest public container port operator in China has expanded rapidly in recent years to become the fourth-largest port operator in the world. But the global economic slump caused shipments to fall in the second half of 2011, says CEO Hu Jianhua, No. 3 in the Transportation segment according to the buy side. With excess capacity China Merchants saw net profit sink 5.3 percent last year even as revenue climbed by 63 percent. Hu, a former port engineering student in China who has worked for the Hong Konglisted company since 2007 and led it since 2010, is responding by sharing resources across business units, expanding profitable ports and ensuring those operations are professionally managed. Other companies in the region find that advantages gained from strong government ties havent been enough to allay some investor concerns. Since opening its first casino in Macau in 2006, thanks to land and permits granted to it and just two other casino operators, Galaxy Entertainment Groups revenues have gone straight up, from HK$13 billion in 2007 to HK$41 billion last year. In 2011, Galaxy opened a second, 550,000-square-meter (5.92 million-square-foot) casino and will add 450,000 more square meters to that by 2015. Even then Galaxy will still have 1 million square meters left to develop. Macau is an oligopoly, says CFO Robert Drake, a former investment banker with William Sword & Co., a New Jersey boutique. We have very latent demand and very little supply. Drake, ranked second-best CFO in the Gaming & Lodging segment by buy-side analysts, nonetheless says the company is considering diversifying into conventions. Currently, some 85 percent of its customers come from mainland China, Hong Kong and Taiwan, and some Western investors are nervous about Galaxys dependence on gaming. The CFO admits Western investors need to be educated about Macaus potential. A similar desire to diversify has led Larsen & Toubro, the biggest construction and engineering company in India, to engage in foreign deal making, and not just in Asia. Its most recent transaction, the acquisition of U.K.-based Thalest in April for an undisclosed amount, will give L&T the capacity to make navigational and other control systems for naval and merchant ships. Thalests current customers include the Australian, British and U.S. navies. CFO R. Shankar Raman, who ties for No. 1 in Infrastructure, as voted by sell-side analysts, says the company is making these conscious derisking efforts to lessen its dependence on domestic markets. Even so, more than 90 percent of L&Ts business remains in India. And though Raman says many other Asian markets represent good opportunities, he expects stiff competition there. Also facing uncertainty is Ping An Insurance (Group) Co. of China. Thanks to favorable government policies and strong economic growth, the company has grown in the past decade from a small insurance carrier into a giant with assets of 2.3 trillion yuan ($364 billion) and more than ten subsidiaries involved in banking and investment services as well as insurance. Since he took the CFO job in 2010, Yao Bo notes, China has tightened monetary policy and regulations while the capital market has grown turbulent. The resulting high need for flexibility, says Yao, ranked top CFO in the Insurance segment by both the buy and sell sides, requires him to constantly test new strategies. Currently, Ping An is focusing on cross-selling products to existing customers and centralizing its back office to drive growth. In 2011 cross-selling accounted for 42.9 percent of the new credit cards issued by Ping An Bank, 42.9 percent of new retail deposits at the bank and 63.3 percent of the assets raised by the first fund of Ping Ans investment management subsidiary, Ping An UOB Fund Management Co.
Impressive though such figures may be, hell need to keep innovating to keep Ping An on track, Yao admits. Other members of the All-Asia Executive Team no doubt feel the same way about their own efforts to tap the regions strong growth.