Local mid-market enterprises upbeat on 2023 sales growth

PETALING JAYA: About 93% of mid-market enterprises (MME) in Malaysia are optimistic on the prospects of growing their top line in 2023 despite softening economic growth globally, which is in line with the global average across 14 markets, according to HSBC.

In its latest business balancing act (BBA) survey, it said out of the 93% of optimistic MME, three in 10 (30%) are expecting sales to grow by 15– 20%, while a quarter of these MME (25%) are even more positive and are expecting sales to grow by more than 20%.

The survey polled a total of 171 CEO and CFO from rising and established Malaysian MME with an annual turnover of between US$10 million (RM47.06 million) to US$500 million, where a majority of these companies were from the manufacturing, retail, digital and financial services sectors.

It found that the optimism of sales growth in 2023 stemmed from two major catalysts, with more than half (56%) of the MME sharing that the introduction of new products and services for their businesses, as well as technology-driven efficiencies in their operations (53%) will be major growth drivers. The ability to attract investments and secure financing for their business (50%) and increasing domestic demand (49%) were the other two top drivers cited by the MME.

On major threats to business growth for MME in Malaysia next year, it said the most common concerns raised were inflation and the higher cost of living (63%), rising interest rates (44%) and uncertainty in the political environment (43%).

HSBC Malaysia commercial banking head Karel Doshi said despite the headwinds and challenges, many MME are resilient and positive about their business prospects as they zero in on growth in 2023. The key engines of growth for MME are the introduction of new products and services, leveraging on technology to drive efficiencies and expand into new markets.

“MME are a significant driver of growth to the Malaysian economy, and their optimism in growing their businesses next year in spite of the tougher economic environment expected is definitely a positive sign,” she said in a statement yesterday.

In terms of the financial and strategic balances, for Malaysian MME, the balancing act comes in the areas of trade, in particular exports and the supply chain as well as their digitalisation journey.

For example, over three quarters (78%) of MME plan to enter at least one foreign market in 2023, yet at the same time, over two thirds (69%) are expecting international trade to be more difficult next year, with 43% citing uncertain political environment and increasing tariffs (30%) as a threat to business growth.

On their supply chain, over three-fifths (65%) of MME say that they will focus on making their supply chain more sustainable in 2023, but 29% of these MME say that the lack of quality suppliers and goods to support a sustainable supply chain is a concern.

As for their digitalisation efforts, 45% of MME say that they will expand to new digital platforms and channels, though 37% say that there are also concerns about a decrease in demand and spending from consumers.

A majority of Malaysian MME (72%) have cited that their investment priorities over the next 12 months will be building up adequate cash flow and effective capital management. Aside from that, they will be prioritising investments for marketing products and services (68%), as well as investments that enhance customer experience (66%).

In addition, two-thirds of MME (67%) say they are seeking external investments for their business, while only a third (29%) are planning to make an acquisition of their own to complement their business activities. Divestments are not favoured next year, as only a quarter say that they are looking to sell a whole or a part of their business.

However, a major challenge cited by 63% of the MME when it comes to making viable investments are cost cutting exercises which are expected to be prevalent due to the tougher economic conditions next year.

Companies cite introduction of new products and services, as well as technologydriven efficiencies in its operations as major drivers: HSBC survey