Merger and acquisitions activity in Asia is expected to increase over last year as more companies said they were looking to expand in the face of healthy valuations. In a PricewaterhouseCoopers survey, 42 per cent of the 215 Asian financial institutions polled forecast that they will do a deal this year, up from 38 per cent in last year's survey which was conducted in the beginning of 2008 before the region felt the full-force of the financial crisis.

However analysts warn of the optimistic numbers, saying that although the number of deals might increase, their valuations will fall to 2005-2006 levels as numerous smaller deals will be concluded in an uncertain market. In 2005 deals worth US$38.7 billion were concluded while in 2006 deals worth US64.5 billion were done. Asian financial institutions concluded deals worth US$99.1 billion last year and US$125.9 billion in 2007.

Among Asian financial groups, Taiwanese and Chinese companies are the most likely to undertake merger and acquisition activity in the next 12 months while Indonesia and Vietnam have overtaken China and India as the most popular places to do deals, the Financial Times reported.

Adding to the M&A optimism in the region, Chairman of the Industrial and Commercial Bank of China Jiang Jianqing, recently  said that the bank will focus its overseas acquisition strategy on emerging markets and Asia this year. ICBC is the world's biggest bank by market value.

?I now expect to see an increased number of smaller deals to build share in underweight markets or segments, rather than the game changing deals that one might have expected at the beginning of the crisis as western players retreat,? Mr Matthew Philips, PwC China partner told the Financial Times.