This article first appeared in The Edge Financial Daily on October 3, 2017 - October 9, 2017

KUALA LUMPUR: Export-oriented firms are more bullish about their business prospects for the next six months compared with their domestic-centric counterparts, said RAM Holdings Bhd.

In a statement, RAM said given the momentum of global trade recovery that has led to seven months of double-digit export growth for Malaysia since December 2016, export-oriented businesses stand to gain from this thrust in external demand.

“This affirms the higher index values for turnover and profitability expectations in all the four previous surveys for both small and medium enterprises (SMEs) and corporates to date,” it said.

According to its fourth business confidence index survey, the corporates index and SME index continued to show positive sentiment, with respective readings of 55.8 and 52.1, for the fourth quarter of 2017 (4Q17) to 1Q18.

RAM said relative to SMEs, the corporate segment’s more stable and stronger sentiment throughout the observed periods is attributable to their economies of scale, operational flexibility, client bases and bargaining power to ride through short-term economic vagaries.

“Viewed in this light, SMEs’ sentiment is more volatile, in tandem with the greater uncertainties faced by their businesses,” it added.

The survey revealed that the agriculture/mining sector was again the most bullish, largely driven by intentions to hire and expand businesses in order to increase capacity, after production was disrupted by adverse weather conditions last year.

The transport/storage sector was the least bullish, mainly because of continuing challenges in the shipping and oil & gas sectors.

As for SMEs, the least optimism was shown in turnover and profitability for the next two quarters, though respondents were optimistic about business expansion and hiring.

Performance uncertainty is felt by those in construction, manufacturing, transport/storage and retail players, as their operations may be contract-based and/or dependent on narrower or niche clientele, which could cause volatility.

Moving forward, despite downside prospects in business outlook among SMEs, both corporates and SMEs maintain overall positive sentiments going into 2018.

“This is perhaps a welcome indication that the momentum of economic recovery in Malaysia has an element of sustainability,” RAM said.