KUALA LUMPUR (June 28): Malaysia firms remain upbeat about their business outlook going into the third and fourth quarters, with the corporate and small medium enterprises (SME) indices, again, chartering positive sentiment at 56.8 and 52.1 respectively, according to the latest RAM Business Confidence Index (RAM BCI).

The sustained positive readings indicate Malaysia's economic resilience in the first half of 2018 is likely to carry through to the second half of the year, supported in particular by the corporate segment's firm optimism, particularly after the outcome of the 14th general election (GE14).

"Notably, both the corporate and SME segments display higher overall indices after GE14 compared to before the event," said RAM in a statement today, adding it is observed that the corporate and SME indices were higher by 0.7 and 2 points respectively in the post-GE14 sample compared with the pre-GE14 sample.

While better business sentiment post-GE14 is observable across all sectors for both corporates and SMEs, only the corporate construction sector shaved off one point, said RAM which noted that the uncertainties over various property and infrastructure projects following the election victory of Pakatan Harapan may have slightly dampened the prospects of incoming contracts for corporate construction firms as depicted by its lower turnover sub-index for the post-GE14 sample.

That said, corporate construction firms remained firmly optimistic post-GE14, with an overall index value of 55, indicating still bullish prospects for the rest of the year.

Meanwhile, among the firms surveyed after GE14, only 22.3% of corporates and 17.1% of SMEs cited "rising cost of doing business" as their primary challenge, against 32.2% and 22.1% respectively before GE14.

This was likely due to expectations that the zero-rating of the 6% goods and services tax and the three-month tax holiday until the sales and services tax is reintroduced in September will allow businesses to achieve some cost savings.

Nevertheless, the RAM BCI sub-index covering access to bank financing has been hovering within the "negative sentiment" territory for the last four surveys, and at 48.1 (-0.4 points) for 3Q-4Q 2018, suggesting that SMEs are still pessimistic about their ability to get loans.

"This appears to also be an issue pertinent to only SMEs, as their larger corporate counterparts have consistently recorded positive readings for this sub-index in the last six surveys, suggesting generally less difficulty in obtaining bank financing," said RAM.

In the latest survey, 28% of SMEs indicated that they expected it to be more difficult to access bank financing, which is roughly double the proportion of corporates (14.3%).

This issue is especially prominent for the SME construction sector where 33.4% of firms expected increased difficulty in this area, prompting RAM to stress that SMEs must be given better access to funding to support the country's economic growth.

Furthermore, SMEs' turnover and profitability expectations have risen in the last three surveys — a sign pointing to potentially a greater need for financing, RAM added.

Moving forward, it said short-term economic uncertainties remain such as a slew of potential new measures on the domestic front, as well as the impact of the US Federal Reserve's rate hikes and the repercussions of the ongoing US-China trade war.

"While businesses have shown more positive confidence following the results of GE14, these prevailing uncertainties may dampen the prospect of business optimism translating fully into eventual tangible results," said RAM.

The RAM BCI is a survey jointly conducted by RAM Holdings Bhd and RAM Credit Information Sdn Bhd, on business sentiment in Malaysia, with close to 3,500 SMEs and corporates surveyed.