This article first appeared in The Edge Financial Daily on March 25, 2020

KUALA LUMPUR: Business sentiment among Malaysian companies dived to a new low for the second quarter of 2020 (2Q20), sinking into the contractionary zone of -21.52 percentage points (ppts), from +10.22ppts in 1Q20, according to Dun & Bradstreet (D&B) Malaysia’s latest Business Optimism Index (BOI) study.

The last time the index fell into negative territory was in 4Q15.

Dun & Bradstreet (Malaysia) Sdn Bhd chief executive officer Audrey Chia said sentiments among Malaysian firms have plunged to a new low due largely to the recent surge in Covid-19 cases.

“We expect the dampened outlook to persist into the second and third quarter of 2020 given that a potential near-term recovery of the hardest-hit sectors such as services and transportation is quite unlikely,” she said in a statement yesterday.

“However, we might be able to see some green shoots once the active cases begin to peak globally. 

In view of these adverse developments, we have trimmed our 2020 growth forecast to 4%,” Chia added.

On a year-on-year (y-o-y) basis, D&B noted that the BOI fell to -21.52ppts in 2Q20 from +5.61ppts a year ago.

The study also showed that all six business indicators, comprising volume of sales, net profit, selling price, inventory level, employees and new orders, have declined on the quarterly and yearly basis.

For the quarter-on-quarter basis, net profit declined sharply from +11.11ppts in 1Q20 to -40.2ppts in 2Q20; volume of sales down from +8.7ppts to -27.84ppts; selling price fell from +10.14 ppts to -10.31ppts; new orders contracted from +24.16ppts to -26.8ppts; employment levels decreased from +9.17ppts to -5.21ppts and inventory levels fell from -1.93ppts to -20.62ppts.

On a y-o-y basis, volume of sales was down from +6.83ppts in 2Q19 to -27.84ppts in 2Q20; net profits dropped from +1.95ppts to -40.2ppts; selling price fell from +6.83ppts to -10.31ppts; new orders plunged from +10.24ppts to -26.8ppts. 

Inventory levels fell from +4.39ppts to -20.62ppts and employment levels dropped from +3.41ppts to -5.21ppts.

The study revealed the majority of the sectors are pessimistic about the outlook, with the services and transportation sectors being the least optimistic.

Both services and transportation sectors are pessimistic about their prospects, with all six indicators in the contractionary zone for 2Q20.

Meanwhile, the manufacturing sector expects its outlook to dampen significantly, with five indicators in the negative territory.

Similarly, for the wholesale trade, the sentiment for the sector is downbeat and has five indicators in the negative region.