Firms upbeat on outlook for next six months, RAM Ratings index shows

PETALING JAYA: Firms are optimistic about business prospects for the next six months, according to the RAM Business Confidence Index.
The rating agency said in a statement, the Corporates Index and SME Index continued to show positive sentiment, with respective readings of 55.8 and 52.1 for the period of Q4 2017 to Q1 2018.
RAM Ratings said corporates have been consistently more sanguine throughout all three earlier readings.
Compared to SMEs, the corporate segment is more stable and 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.
SMEs’ sentiment, however, is more volatile, in tandem with the greater uncertainties faced by their businesses.
RAM said export-oriented firms are more bullish than their domestic-centric counterparts.
“Given the momentum of global trade recovery, which has led to seven months of double-digit export growth for Malaysia since December 2016, 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 SMEs and corporates to date,” it noted.
The rating agency said corporates are the most positive about business expansion at 61.8, but capacity utilisation recorded the lowest reading of 53.0, with close to 75% of respondents expecting normal capacity utilisation rate of between 75% and 95%.
For SMEs, the overall sentiment still showed greater variation with each survey and this quarter’s reading has reversed from the higher readings of the previous quarter.
“In particular, the areas that show the least optimism for Q4 2017- Q1 2018 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,” RAM noted.
Despite the poorer performance outlook, SME respondents still expressed optimism on business expansion (55.8) and hiring sentiment (56.3) in the next two quarters.
Looking ahead, both corporates and SMEs at large have maintained overall positive sentiments going into 2018, despite some downside prospects in business outlook among SMEs.
“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.