This is based on the momentum of global trade recovery that led to 7 months of double-digit export growth for Malaysia

By DASHVEENJIT KAUR / Pic By BLOOMBERG

Export-oriented firms are more bullish about their business prospects within the next six months compared to their domestic-centric counterparts, said RAM Holdings Bhd.

RAM — in its fourth Business Confidence Index (BCI) — said export-oriented firms are more optimistic with the outlook, based on the momentum of global trade recovery that has led to seven months of double-digit export growth for Malaysia since December last year.

“The export-oriented businesses stand to gain from this thrust in external demand.

This affirms the higher index values for turnover and profitability expectations in all the four previous surveys for both small and medium enterprises (SMEs) and corporates to date,” RAM said in a statement yesterday.

BCI said the indices for corporate, as well as SMEs, continued to show positive sentiment — with respective readings of 55.8 and 52.1 for the fourth quarter of 2017 (4Q17) to 1Q18.

Relative to SMEs, RAM further said the corporate segment’s stronger sentiment throughout the observed periods is attributable to their economies of scale, operational flexibility, client bases and bargaining power to ride through short-term economic vagaries.

In the corporate segment, the agriculture/mining sector was again the most positive — largely driven by intentions to hire and expand businesses in order to increase capacity, after production was disrupted by adverse weather conditions last year.

Meanwhile, the transport/storage sector is the least optimistic at 53.7 on account of continuing challenges in the shipping and oil and gas sectors, among others.

“Viewed in this light, SMEs’ sentiment is more volatile, in tandem with the greater uncertainties faced by their businesses,” it said.

The overall sentiment still showed greater variation with each survey for SMEs in this quarter’s reading has reversed from the higher readings of the previous quarter.

In particular, the areas that show the least optimism for 4Q17 to 1Q18 were turnover and profitability, which fell back below 50 to 49.6 and 48.7 respectively from 52.2 and 50.6 in the preceding survey.

“The performance uncertainty in SMEs is also more prominent among construction, manufacturing, transport/storage and retail players.

“This is because those operations may be contract-based and/or dependent on narrower or niche clientele, thereby rendering their performance more volatile,” it said.

Conversely, RAM said business services that cater to a more diversified clientele across a wide spectrum of sectors continue to exhibit positive business expectations, albeit having lowered to 54.7 from the spike in the previous survey.

Despite the poorer performance outlook, SME respondents in its survey still expressed optimism on business expansion (55.8) and hiring sentiment (56.3) in the next two quarters.

RAM concluded that, despite some downside prospects in business outlook among SMEs, both corporate and SMEs at large have maintained overall positive sentiments going into 2018.

“This is perhaps a welcome indication that the momentum of economic recovery in Malaysia has an element of sustainability.

“This is especially so when firms have continued to express intentions to expand capacities and keep up hiring as well as capital investments,” RAM said.

Nonetheless, the findings of the RAM survey suggest that SME agencies and regulatory authorities would need to continue to monitor SMEs’ performance closely and increase assistance to help these firms overcome short-term challenges and uncertainties.