9 in 10 ASEAN corporates have the most bullish trade outlook in the world: report

This outlook by ASEAN firms is higher than the global average of 77%.

Southeast Asian corporates are almost more positive about their company’s trade outlooks compared to global peers, as they are turning their focus to increasing investments into supply chain technology to turn looming threats of global trade tensions into a headwind, according to HSBC’s Navigator report.

The report revealed how ASEAN firms have the most bullish trade outlook in the world with 86% of firms positive about their company’s foreign trade prospects amidst ongoing trade tensions. HSBC’s report highlighted how this outlook by ASEAN firms is higher than the global average of 77%.

The report surveyed 8,500 business in 34 markets across five ASEAN markets in Singapore, Malaysia, Thailand, Indonesia and Vietnam.

HSBC noted that the ongoing trade tension between China and US open up opportunities for ASEAN markets in areas like electronics, textiles and automotives.

“Management teams that are considering shifting supply chains to ASEAN have to ask themselves many questions: ‘Is there local capacity, how are these plants receiving raw materials, do they have people capacity, should they build new plants - are they even allowed to do this,” HSBC Singapore’s CEO Tony Cripps noted. “Amongst this, technology will be a common thread for consideration and will be key to increasing competitiveness and appeal.”

Increasing corporate use of technology is considered as the top change planned for supply chains in the next three years amongst ASEAN respondents, with 34% of Southeast Asian firms considering it versus the global average of 27%, HSBC stated.

ASEAN countries like Thailand and Malaysia already have existing production networks in electronics, especially in hard disk drive (HDD) assembly, the report noted.

“Thailand exports about the same amount of finished storage units to the US as China does which would make it relatively easy to shift assembly there, especially since Chinese shipment of HDDs to the US are now subject to at least 10% of US tariff,” the report stated.

Meanwhile, members of the bloc like Singapore , Vietnam and the Philippines also produce a variety of electronic components, whilst Vietnam and Indonesia have become increasingly competitive in light manufacturing and textile exports.

“But shifting supply chains on a large scale is not something that can happen overnight,” Cripps noted. “If trade tensions linger, Thailand, Malaysia and Vietnam are likely to see selective gains from export diversion.”

On the other hand, 75% of ASEAN businesses believe that governments are becoming more protective with their key export markets, the report found. It is the highest reported amongst the global trade blocs and is also higher than the global average of 63%.

“ASEAN companies are overwhelmingly bullish on their commercial prospects and fully expect protectionism to rise,” Cripps said. “This seems counterintuitive at first glance and it certainly raises the question of whether they are underestimating the trade risks that come with rising protectionism or are shrewdly seeing opportunity amongst the trade disruption.”