This article first appeared in The Edge Financial Daily on January 9, 2020

KUALA LUMPUR: The RAM Business Confidence Index (RAM BCI) for the first quarter (1Q) to second quarter of this year indicates a possible bottoming out of negative sentiment among Malaysian businesses.

RAM Holdings Bhd said the Corporate Index finally bucked the downtrend of the last few quarters to rise 3.2 points to 56.4, while the SME Index (Small and Medium Enterprise Index) rose for the second consecutive time to 54.2 for 1Q20-2Q20.

“The upturn in both indices is underpinned by broad-based improvements in the measured aspects and appears particularly strong in business performance indicators,” the rating agency said in a statement yesterday.

RAM said the higher optimism follows consecutive quarters of weak business sentiment throughout 2019 amid a plethora of global uncertainties.

“Although the majority of firms still cite ‘weak economic conditions’ as their main challenge through the next six months (41.3% of corporates and 42.5% of SMEs), the percentage of firms that expressed this was lower than the all-time highs of 45.6% and 44.8% respectively in the preceding quarterly survey,” it said.

This, RAM said, suggests slightly better business prospects heading into 2020.

RAM also pointed out that the more upbeat overall sentiment for 1Q20-2Q20 is stronger among export-oriented firms (corporates: +4.6 points; SMEs: +1.6 points) compared with their domestic-oriented counterparts (corporates: +3 points; SMEs: +0.9 point).

“However, domestic-centric firms appear to be more stable economic drivers as the volatile external environment [has] caused big swings in export-oriented firms’ business performance expectations in the past,” it said, adding that the upward trend in overall indices for domestic-oriented corporates and SMEs highlights their underlying resilience despite lingering global uncertainties.

The RAM BCI is a survey jointly conducted by RAM and Experian Information Services (Malaysia) Sdn Bhd on the business sentiment in Malaysia. Released quarterly, the index is based on data from a survey of approximately 2,000 SMEs and corporates across five main SME and four main corporate industry segments.

An index value of 50 is the neutral benchmark. A value above 50 indicates positive sentiment by the firm, while below 50 shows negative sentiment.