Hong Kong: Smaller exporters in developing Asia, including China and India, expect trade to be stable to slightly higher in the next three months, thanks to fiscal stimulus and improving intra-regional trade, but they worry about exchange rates, a survey showed on Wednesday.
In contrast, their peers in developed Asian economies such as Hong Kong and Singapore, and further afield in Australia, remain bearish about the business outlook because they are more reliant on still weak Western demand, according to an inaugural trade confidence survey by banking giant HSBC.
Improving confidence in the region’s economic powerhouses China and India, however, raises hopes they can spur economic recovery across the region, HSBC said.
“I think Asia will pick up more quickly than the rest of the world,” Lawrence Webb, HSBC’s global head for trade and supply chain, said at a media briefing. “Intra-regional trade within Asia will be the spur to that recovery.”
Webb said $700 billion worth of stimulus throughout Asia, much of it in China, since the global financial crisis hit the region last summer was starting to filter through to the broader economy, generating demand for commodities and other products.
“We are seeing some quite big export flows between China and India and China and Vietnam, for example, and that gives an opportunity for many companies to diversify (their markets). But demand in the United States and Europe is still low,” he said.
The survey, conducted in April and May, covered 2,102 small and medium-sized exporters, importers and traders across Asia, Australia and the United Arab Emirates (UAE).
The results were used to calculate an HSBC Trade Confidence Index. The UAE was most optimistic with an index reading of 115.2. Index scores can range between 100 and 200. Anything above 100 is optimistic while scores below 100 reflect pessimism.
Hong Kong firms were most pessimistic, but the average reading for seven markets covered was slightly favourable at 105.6.
“The fact that the average is 105, above neutral, shows a slightly positive outlook for trade over the next three months. But if we are seeing positive signs, we know the economy is fragile, so we’ll have to see how it goes in six months’ time,” Webb said.
Indeed, Vietnam was the only country where more than half of companies, 54%, expect trade volumes to rise in the next three months. In China, 42% of firms expect an increase while 31% expect volumes to remain at current levels.
Only 25% of Australian companies expect trading volumes to increase, although 47 percent say they are likely to be stable.
Companies across markets said they were mostly comfortable with access to trade finance, indicating that banks are lending to smaller companies again.
Exporters’ biggest concern is volatile exchange rates, which is a bigger barrier to business growth than declining demand or profits, they say.
“In the fourth quarter of last year and early this year we saw huge fluctuations in exchange rates,” Webb said. “It could be four to five months between the time a supplier accepts an order and the time he receives payment. So, if you are operating on a profit margin of 8%, you could see half or more of that margin wiped away by volatile exchange rates.” HSBC Trade Confidence Index scores: (A) (B) United Arab Emirates 115.2 34 26 India 114.7 40 30 Mainland China 111.8 42 27 Vietnam 108.0 54 19 Singapore 99.9 29 33 Australia 96.6 25 28 Hong Kong 93.1 24 46.
Average 105.6 (A) Percentage of firms that see trade rising in next 3 months (B) Percentage of firms that see trade falling in next 3 months