RAM Rating Services Bhd (RAM Ratings), which publishes the index, said the Corporate Index bucked the downtrend of the last few quarters to increase 3.2 points to 56.4, while the SME Policy Index rose for the second consecutive time to 54.2 for 1Q20-2Q20.
The upturn in both indices is supported by broad-based improvements in the measured aspects and appears strong in business performance indicators, the rating agency said in a statement yesterday.
“The higher optimism follows consecutive quarters of weak business sentiment throughout 2019 amid a plethora of global uncertainties,” it said.
Although 41.3% of corporates and 42.5% of small and medium enterprises (SMEs) cited “weak economic conditions” as their main challenge through the upcoming six months, RAM Ratings said 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.
This suggests slightly better business prospects towards 2020.
However, the operating landscape is expected to remain bumpy in 1Q20-2Q20 as more firms (20.8% of corporates and 24.7% of SMEs) are expecting “more competition” as their main challenge.
The more upbeat overall sentiment on 1Q20-2Q20 is also stronger among export-oriented firms (corporates: +4.6 points; SMEs: +1.6 points) compared to their domestic-oriented counterparts (corporates: +3.0 points; SMEs: +0.9 points).
“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.
“The respective overall indices for domestic-oriented corporates and SMEs trended upwards for the third and second consecutive times in the latest survey, highlighting their underlying resilience despite lingering global uncertainties,” it said.
Among domestic-oriented sectors, the construction industry showed consistent positive momentum in sentiment, with the overall corporate construction index char- ting one of its biggest jumps to date — surging 3.6 points to 56.4.
Another domestic-oriented sector that showed a positive pace in sentiment is the retail sector. Its index increased to 53.5, the highest level on record.
“The retail sector’s turnover and profitability sub-indices, which have been rising in the last four surveys, also indicate a promising turnaround after having languished below the neutral 50 mark through the first three quarters of 2019.
“All said, domestic demand will keep anchoring business activity in 2020. Coupled with firms’ greater optimism, this augurs well for the sustainability of Malaysia’s economic growth as we enter a new decade,” RAM Ratings added.
The RAM BCI is a survey jointly conducted by RAM Holdings Bhd, the parent firm of RAM Ratings, and Experian Information Services (M) Sdn Bhd, on business sentiment in the country.
Released quarterly, the index is based on a survey of approximately 2,000 SMEs and corporates across five main SME and four main corporate industry segments.
Source: The Malaysian Reserve