RAM: Malaysian firms positive about H1 business outlook

This is the second consecutive year that RAM Ratings has been honoured as Rating Agency of the Year, Malaysia by The Asset.

KUALA LUMPUR: RAM Holdings Bhd's first business confidence index has revealed that Malaysian companies and small and medium enterprises (SME) are positive over the business outlook for the first half of this year.

RAM Ratings Services Bhd economist Kristina Fong said a survey of business sentiment among SMEs and corporates across five main industry sectors for the first half of 2017 pointed to an optimistic start to the year.

The SMEs surveyed were from the retail, construction, business services, transport and storage, as well as the manufacturing sector.

The corporates included those from manufacturing, construction, wholesale, agriculture and mining as well as transport and storage sectors.

"The RAM Business Confidence Index for corporates recorded a slightly higher positive sentiment of 56.9 compared to those of SMEs which came in at 53.2,  with both above the benchmark indices of 50," Fong said.

She was speaking at a media briefing on RAM's first Malaysian Business Confidence Index in Kuala Lumpur on Tuesday.

Fong said the corporates showed a stronger positive outlook which could be attributed to the expected pick-up in trade activities on the back of a US recovery and sustained demand from China.

All the five sectors recorded an above benchmark of 50, signalling a general sense of optimism among corporate Malaysia in the next six months, with the manufacturing sector, a key sector of the economy recording a notable positive sentiment of 56.5.

The indices tally with the SMEs as firms are likely anticipating a recovery in external demand along with a continuation in support provided by domestic demand.

On the other hand, Fong said less positive sentiment was attributed to the wholesale sector at 54, given the weak domestic demand on account of the higher cost of living and slack labour conditions in 2016.

"Although a strong rebound in durable goods sales was not anticipated in the near terms, domestic wholesale activity should be resilient on the back of sustained necessities consumption," she added.

For SMEs, the RAM survey indicated that the most optimistic sector was manufacturing, with an index of 54.1, followed by construction at 53.8 due to anticipated strengthening of export activities next year and ongoing public infrastructure works.

On the whole, Fong said SMEs are less sanguine about business expansion and capital investment in the first half of this year compared to their corporate counterparts, in light of the challenging economic environment.

RAM Holdings group chief executive officer and executive director Datuk Seri Dr K. Govindan said having surveyed 3,000 SMEs and corporates, the RAM Business Confidence Index is the most comprehensive of business sentiment in Malaysia.

"This could serve as a useful barometer in identifying how the economy is moving, and more importantly, in what direction it is likely to go in the near future.

"We had the intention here to create a quarterly business confidence index. It would serve as a good leading indicator, that is forward looking to provide insights for not just the business community, but also policymakers in understanding the business community's perception of economic prospects," he said.

On the findings, he said the overall business confidence indices for both corporates and SMEs indicate healthy economic prospects over the next six months.

"The local business sentiment is being significantly boosted by the massive infrastructure projects and property developments under way.

"Both corporates and SMEs also continue to be positive in hiring, which reinforces the fact that there is no major softening of the labour market in the country. Whatever retrenchment is largely confined to oil and gas and financial services," Govindan said. - Bernama
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