The sustained positive readings indicate Malaysia’s economic resilience in 1H18 is likely to carry through to the second half of the year, supported in particular by the corporate segment’s firm optimism. — Bernama photo
KUCHING: The latest RAM Business Confidence Index (RAM BCI) readings suggest that firms remain upbeat about their business outlook going into the third and fourth quarters of 2018 (3Q and 4Q18).
In a a press statement, RAM Ratings noted that the corporate and SME indices again charted positive sentiment at a respective 56.8 and 52.1, with continued improvement in their turnover and profitability sub-indices.
“The sustained positive readings indicate Malaysia’s economic resilience in 1H18 is likely to carry through to the second half of the year, supported in particular by the corporate segment’s firm optimism.
“The results of our survey also show that the outcome of the 14th General Election (GE14) may have partly contributed to the more upbeat sentiment among firms,” it said.
It noted that both the corporate and SME segments display higher overall indices after GE14 compared to before the event.
Its 3Q to 4Q 2018 survey was conducted in April and May and in this round of index calculation, it has have separated respondents to pre-GE14 and post-GE14 buckets, based on when they were surveyed; about 35.4 per cent of the 1,000 corporates and 33.4 per cent of the 2,500 SMEs were surveyed after GE14.
“We observe that the Corporate and SME indices were higher by a respective 0.7 and two points in the post-GE14 sample relative to the pre-GE14 sample
“The better business sentiment post-GE14 is observable across all sectors for both Corporates and SMEs, except for the Corporate construction sector, which shaved off one point.
“The uncertainties over various property and infrastructure projects following the election victory of Pakatan Harapan may have slightly dampened the prospects of incoming contracts for corporate construction firms, as depicted by its lower turnover sub-index for the post-GE14 sample.
“That said, corporate construction firms remained firmly optimistic post-GE14, with an overall index value of 55.0, indicating still bullish prospects for the rest of the year,” RAM said.
Meanwhile, it pointed out that the proportion of firms citing ‘rising cost of doing business’ as their main challenge was also much lower after GE14, likely on expectations that the zero-rating of GST and the three-month tax holiday until the SST is reintroduced in September will allow businesses to achieve some cost savings.
Among the firms surveyed after GE14, it noted that only 22.3 per cent of corporates and 17.1 per cent of SMEs cited ‘rising cost of doing business’ as their primary challenge, as opposed to a respective 32.2 per cent and 22.1 per cent before GE14.
Drilling down to SMEs’ ability to access bank financing, the RAM BCI sub-index covering this aspect has been hovering within the ‘negative sentiment’ territory for the last four surveys; it stands at 48.1 (down 0.4 points) for 3Q and 4Q18.
“This suggests some concerns over their funding conditions. This appears to also be an issue pertinent to only SMEs, as their larger corporate counterparts have consistently recorded positive readings for this sub-index in the last six surveys, suggesting generally less difficulty in obtaining bank financing,” it said.
In the latest survey, it also noted that 28 per cent of SMEs indicated that they expected it to be more difficult to access bank financing.
“This is roughly double the proportion of Corporates (14.3 per cent) with the same response. This issue is especially prominent for the SME construction sector, where 33.4 per cent of firms expected increased difficulty in this area. In view of our findings, it is important to ensure SMEs’ better access to funding, to support the country’s economic growth.
:Furthermore, SMEs’ turnover and profitability expectations have risen in the last three surveys – a sign pointing to potentially a greater need for financing,” it added.
Moving forward, RAM Ratings highlighted that short-term economic uncertainties remain.
It said, “On the domestic front, a slew of potential new measures, such as the change in tax regime, the review of major government-linked projects and the proposed increase in minimum wages, by the new administration may impact domestic businesses.
“Meanwhile, on the global front, the impact of the US Federal Reserve’s rate hikes and the repercussions of the ongoing US-China trade war also present challenges.