Business outlook sunnier

SMEs in Asia are more confident with Vietnam, India being most upbeat

ASIAN business confidence is bouncing back from the low levels seen last year, according to a new survey.

HSBC's twice-yearly confidence survey of small- and medium-sized enterprises (SMEs) shows that firms in the region's developing countries are the most upbeat.

Those in export-oriented economies that have been hard-hit by the economic downturn, such as Singapore, are less so.

The survey - which rates confidence from zero to 200, with zero the lowest and 100 a neutral confidence level - gives Asia as a whole an index score of 107 for the second quarter of this year.

The report suggests that the region's SMEs are now significantly more optimistic about prospects, given that confidence levels plunged to 92 points in the last quarter of 2008.

Developing countries Vietnam and India received the highest scores of 150 and 128 respectively.

Export-oriented Singapore came in second from bottom among the eight Asian economies surveyed with an index score of 93 - a 23-point increase from six months ago - and Hong Kong at the bottom with 83 points.

Despite Singapore's low ranking, confidence has still soared since the fourth quarter of last year when it hit 70 points.

'Singapore's open business environment and reliance on global trade mean that our SMEs are particularly vulnerable to external shocks,' said Ms Tan Siew Meng, HSBC's head of commercial banking in Singapore, at a media briefing yesterday.

About six in 10 Singapore SMEs are anticipating flat to positive gross domestic product growth this year, compared to 18 per cent of firms in the previous survey.

The study had polled 2,401 Asian companies; 300 were from Singapore.

CIMB-GK economist Song Seng Wun said: 'Confidence levels are definitely much higher now, after heavy intervention by governments in many areas... but we must remember this is an improvement from a fairly depressed level six months ago, when there was a real risk of a banking crisis with unimaginable consequences.'

HSBC reports anecdotal feedback from customers who say that order books started to grow in April this year.

'Many (customers) are telling us that orders are coming back and we are seeing active utilisation of existing banking facilities and greater demand for our suite of credit facilities,' said Ms Tan.

But not all firms have seen sales rise.

Mr James Pang, director of Wilsin Office Furniture, believes that increased optimism is not evident in the retail sector where sales volumes are still not up to expectations.

The survey also shows that Singapore's SMEs are looking for ways to expand business during the downturn. It reveals that firms are proactively developing strategies to boost demand - 44 per cent of SMEs were open to diversifying their products and services, while 37 per cent were keen to move into other markets and seek additional profit streams.

This bodes well for the future of the Singapore economy, said Ms Tan. 'The proactiveness of our SMEs in taking steps to increase demand reflects their maturity and flexibility,' she added.

Looking ahead, CIMB-GK's Mr Song said the improved confidence shown in the second quarter may not herald further rises over the coming months.

'We have no clue as to how business sentiment will progress beyond September... the traditional year-end retail boom may yield lacklustre sales due to contracting demand from the United States and Europe,' he said.

Source: Straits Times, 16 July 2009