KUCHING: Sentiments are positive for the first half of 2017 with corporates displaying a slightly higher positive outlook with 56.9 as compared to small and medium enterprises (SMEs), which recorded 53.2.
Despite the current challenging economic conditions, the majority of firms surveyed – covering 79.3 per cent of SMEs and 62.5 per cent of corporations – are profitable.
The is according to the first RAM Business Confidence Index, a jointly-conducted survey on business sentiments among SMEs and corporates across five main industry sectors concluded in November 2016.
RAM Holdings group chief executive officer and executive director Datuk Seri Dr K Govindan said, “The overall business confidence indices for both SMEs and Corporates indicate healthy economic prospects over the next six months.”
SMEs surveyed were from the retail, construction, business Services, transport and storage, and Manufacturing sectors. Meanwhile, corporations included those from the Manufacturing, Construction, Wholesale, Agriculture and Mining and Transport and Storage sectors.
All five sectors recorded indices above the 50-point benchmark, signaling a general sense of optimism amongst Corporate Malaysia.
According to the index, the corporate manufacturing sector recorded a notable positive sentiment of 56.5, suggesting that firms are anticipating a recovery in external demand along with continuing support provided by domestic demand in 2017.
“Likewise, the construction sector remained positive due to ongoing infrastructure works while the Wholesale sector was slightly less optimistic with an index of 54.0 given the slowdown in retail domestic demand, on account of the increasing cost of living and soft labour conditions earlier in 2016,” RAM explained.
Meanwhile, the RAM Business Confidence Index for SMEs was also positive at 53.2, with all sectors registering above 50, indicating that SMEs are cautiously optimistic.
The SME Manufacturing sector emerged as the most sanguine about business prospects at 54.1 in tandem with an expected uptick in economic activities in 2017.
“The retail sector was less bullish at 51.9, as it has borne the brunt of the decline in discretionary spending,” it added.
“However, it is anticipated that the labour market will see some improvements and together with the normalisation of demand after GST implementation, discretionary spending can be expected to increase going forward.
“Most key aspects of the indices registered above 50, suggesting that both corporate and SME businesses in Malaysia are broadly optimistic about economic performance.”
Corporates are relatively more positive, RAM observed, with most indicators including hiring, capacity utilisation and business expansion. Despite positive sentiments about turnover and profitability in the first two quarters of, the survey findings suggested that SMEs in general exercise some degree of caution and risk aversion.
“In the light of economic uncertainties, they are seen to opt for greater utilisation of existing capacity ahead of new capital investments. The survey also found that more than 80 per cent of firms surveyed did not require bank financing; of the rest that did, ease of access to financing was higher for SMEs than Corporates.
‘This could be due to a combination of factors including tighter lending requirements by banks.”
RAM Business Confidence Index measures positive and negative sentiment of firms on their 6-months forward looking expectations on key aspects which include turnover, profitability, business expansion, hiring, capital investment, capacity utilisation and access to bank financing. An index of above 50 indicates a positive sentiment while less than 50 indicates a negative sentiment.