Small and mid-market businesses (SMEs and MMEs) in mainland China and Indonesia that engage in export and import activities are most optimistic in their trade outlook for the next three months, according to the latest HSBC Trade Confidence Index.
The HSBC Trade Confidence Index covers a total of 12 markets – including key economies in the Asia-Pacific region, the United Arab Emirates (UAE), Brazil, the UK and the USA. In the biggest opinion survey of its kind, over 3,500 trade-oriented SMEs and MMEs were asked about their three-month outlook on: trade volume; buyer and supplier risks; the need for trade finance; access to trade finance; and the impact of foreign exchange on their businesses. The results were used to calculate an index ranging from 0 to 200, where 200 represents the highest confidence level, 0 represents the lowest and 100, neutral.
The index shows an overall positive outlook across emerging and developed economies, with respondents from mainland China (121 points), Indonesia (120) and the UAE (118) the most confident about trade activity and growth. Improved sentiment was most evident in Hong Kong, Singapore and Australia, where confidence scores rose by about 10% since the last survey, conducted in the second quarter of 2009.
“We are seeing signs of what could be the start of a global trade recovery: trade volumes have stabilised and are posting notable growth in certain markets,” says Lawrence Webb, HSBC Global Head for Trade and Supply Chain.
According to Webb, the survey shows that traders around the world expect more orders and better access to credit and hold a stable outlook on buyer and seller risks. He adds that, in Asia, huge government stimulus packages such as in Mainland China are buoying sentiment leading to an increase in the cross-border trading of commodities, construction materials and equipment. Growing intra-Asia trade and stronger domestic consumption are also signs of economic recovery.
“However, while overall outlook is positive, it is too early to tell if the rebound is sustainable, until such time as we begin to see a marked recovery in the West as well,” notes Webb.
Hong Kong Traders
Hong Kong posted a nine-point improvement in outlook on trade, with a score of 102 in 3Q09, a 10% increase from 93 in 2Q09. Four in 10 respondents expect their trade volumes to increase in the next three months, from 24% in 2Q09.
The majority of Hong Kong exporters and importers (82% vs 79% in 2Q09) continue to actively trade with Greater China, followed by South-East Asia (63%) and the USA/Canada (62%). Greater China continues to offer the biggest growth opportunities for half of the respondents (51%), while 10% consider the USA/Canada (vs 8% in 2Q09) and nine per cent consider Central/Eastern Europe (vs, 5% in 2Q09) as potential growth drivers.
More respondents cited insufficient profit margins (44% vs 42% in 2Q09) as a major barrier to business growth than foreign exchange volatility (43% vs 54% in 2Q09).
“Hong Kong is clearly benefiting from the recovery in mainland China and will continue to play a key role in facilitating cross-border trade across Greater China,” reveals Webb. Webb says increased trade with other parts of Asia is an opportunity, not just for Hong Kong, but other markets in the region as Asia slowly becomes a significant source of final demand.
Local traders are also eyeing traditional markets in the West in the hope that demand gradually picks up again, says Webb, adding that there is also interest in new trade corridors such as Asia to Latin America, to the Middle East and to Africa, which may help diversify income streams.
In summary, the HSBC Trade Confidence Index found a range of signs in support of a positive global trade outlook:
- The number of respondents expecting trade volumes to grow (44%) significantly outnumber those who expect a contraction (15%), on average 3:1.
- About one-third (32%) of respondents expect their need for trade finance to increase, especially in India (44%), South-East Asia (41%) and the UAE (37%).
- Most respondents expect good access to credit, with over half (59%) saying it will stay the same and around a third (31%) saying access will increase.
- At least four in 10 respondents expect banks to meet future trade finance needs, except in the UK, where 45% will rely on their own capital compared to 29% who will seek bank support.
- The majority of respondents expect buyer default risk (69%) and supplier nondelivery risk (75%) to remain stable, although a slightly greater number of respondents expect an increase in buyer risk (17%) than supplier risk (12%).