RAM: M’sian firms continue to show positive sentiment

PETALING JAYA: Malaysian firms remain sanguine about business prospects over the next six months in line with Malaysia’s economic recovery, according to RAM Ratings.

In its latest Business Confidence Index, the ratings agency said that corporations and small and medium enterprises (SMEs) have continued to show positive sentiment, moving forward.

The corporates and SME indices registered positive readings of 55.8 and 52.1 for the fourth quarter of 2017 to the first quarter of 2018 (4Q17-1Q18) period.

Any reading below 50 indicate negative sentiment on the market.

“We note that corporates are positive on all fronts through next year.

“Relative to SMEs, the corporate segment is more stable and the stronger sentiment throughout the observed period is attributable to their economies of scale, operational flexibility, client bases and bargaining power to ride through short-term economic vagaries.

“On the other hand, the SMEs’ sentiment is more volatile, in tandem with the greater uncertainties faced by their businesses.

“It should be noted that this quarter’s reading has reversed from the higher readings of the previous quarter,” said RAM Ratings in its report.

The ratings agency noted that export-oriented firms saw more upside potential in 4Q17-1Q18, in contrast to their domestic-centric counterparts.

Given the momentum of global trade recovery, Malaysia’s export-oriented businesses are likely to gain from the improvement in external demand.

To note, Malaysia has recorded strong growth in exports in recent months and this has led to higher-than-expected gross domestic product growth in the first two quarters of 2017.

The country has registered seven months of double-digit export growth since December last year.

RAM Ratings said that the overall positive sentiment on business prospects in the near term is reflective of the momentum of economic recovery in Malaysia.

Despite some downside prospects in business outlook among SMEs, RAM Ratings said both corporates and SMEs at large have maintained overall positive sentiments going into 2018.

“This is perhaps a welcome indication that the momentum of economic recovery in Malaysia has an element of sustainability,” it said.