Rebound in sentiment of export-oriented corporates in 3Q-4Q — RAM

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KUALA LUMPUR (June 27): The RAM Business Confidence Index (RAM BCI) for the third quarter to the fourth quarter of 2019 indicates a rebound in the sentiment of export-oriented corporates in Malaysia.

RAM Holdings Bhd said the overall index for export-oriented corporates rose 2.1 points — the first uptick in the last three quarters and the biggest increase to date.

"At 57.9, the surge in optimism is mainly attributable to a steep spike in corporates' turnover and profitability sub-indices (+7.2 points to 61.6 and +7.5 points to 61.6, respectively)," the rating agency said in a statement.

RAM said the improved reading in export-oriented corporates — corporate manufacturing sector in particular — may have stemmed from positive trade diversion effects.

"Malaysia is one of the key beneficiaries of the ongoing US-China trade war, which has prompted the realignment of global supply chains away from China. A sample of our export-oriented survey respondents reported more orders, mostly from other Asian economies such as Thailand and South Korea," it said.

However, despite more positive readings for export-oriented corporates, the overall RAM BCI still indicates a subdued level of optimism through the next six months.

RAM observed that the overall indices for both corporates and SMEs have only changed marginally from the last survey, at a respective 53.6 (+0.1 points) and 51.8 (-0.3 points).

"The cautiously optimistic sentiment is not surprising given the challenging operating environment, particularly amid the disruptions caused by the US-China trade tensions, Brexit complications and uncertainties amid a scenario of moderating global growth," the rating agency said.

It said most firms still believe that the next six months will remain challenging despite signs of trade diversion benefits.

"The heightened concern is reflected in the higher number of firms citing 'weak economic conditions' as their main challenge in the next six months. This proportion has risen to record highs of 43.1% for corporates and 44.8% for SMEs," RAM added.

The RAM BCI is a survey jointly conducted by RAM and RAM Credit Information Sdn Bhd on business sentiment in Malaysia. Released quarterly, the index is based on data from a survey of close to 3,500 SMEs and corporates across five main industry segments respectively.