Singapore achieves highest trade confidence jump in Asia—HSBC

Increased connectivity with and between emerging markets and China fuelled strong demand in international trade despite inflationary pressures and uncertainty in world economy.

Trade Confidence levels in Singapore recorded the highest jump in Asia indicating strong optimism amongst businesses here in trade growth over the next 6 months. This is according to the bi-annual HSBC Trade Confidence Survey results published recently. The index for Singapore rose to 121, its highest level since the survey began in 2009. It is also higher than the Global and Asian indexes, which were at 114 and 115 respectively.

The HSBC Trade Confidence Index – the largest trade confidence survey globally - polled 6390 exporters, importers and traders from small and mid-market enterprises across 21 countries, including key economies in the Asia-Pacific region, MENA, Latin America, North America and Europe. Businesses were asked about their outlook regarding trade activity and business growth over the next 6 months in the following key areas: buyer and supplier risks; the need for trade finance; access to trade finance; and the impact of foreign exchange on their businesses.

Globally, while the levels of confidence were highest among the emerging markets of India (140), Saudi Arabia (132) and Mexico (125), with Singapore (121) demonstrating a strong uptick, sentiment across the world’s top export markets, namely China (114), Germany (107) and the US (111), were also solid with the China and US indices strengthening by 3 points each.

Commenting on the positive findings on trade confidence in Singapore, Khuresh Faizullabhoy, Head of Trade and Supply Chain at HSBC Singapore said, “Exporters and importers in Singapore are optimistic about trade prospects in the next 6 months, despite inflationary pressures, rising raw material prices and uncertainty in the global economy. The continued strong demand generated by regional trade and the increased connectivity with and between emerging markets and China in particular which is fueling world trade are providing ongoing opportunities for Singapore businesses and underpinning their confidence”.

The TCI findings for Singapore reflect a healthy and positive outlook for trade with 86% (+6) of traders expecting their trade volumes to either increase or hold at current levels over the next 6 months. They are also optimistic of their need for trade finance (93%/ +8) and their access to liquidity (93%/ +9), which they expect to either increase or hold at current levels over the next 6 months.

An ongoing dynamic of international trade, close to half of the traders expect fluctuating exchange rates to have an unfavorable impact on business over the next 6 months (48% of Singapore traders cited this as their top barrier to growth). Concerns around rising costs and reduced profitability were the other two main concerns for Singapore traders, with 42% citing insufficient profitability and the rising costs of services such as shipping, logistics and storage as perceived barriers to growing their import and export businesses. On a positive note, lack of product demand which was a concern in the 2H10 survey traders is now diminished, with only 23% of Singapore traders citing this as an impediment to growth.

While Southeast Asia remains the dominant region for Singapore traders (80%), Greater China has surfaced as a promising region for traders across Asia and in Singapore. 59% of Singapore traders cited China as a region that they are trading with – a significant increase of 13% from end 2010. Close to a third (29%) of Singapore traders also see Greater China as a promising region for growth in the next six months.

Traders globally have also indicated that the RMB would become one of their top 3 trade settlement currencies in 2011. In order of preference, the USD remains the clear leader followed by the Euro, RMB, Pound Sterling and Japanese Yen as the top 5 trade settlement currencies. As trade with China increases, the use of RMB as a trade settlement currency in the next 6 months will gain momentum. 20% of Singapore traders indicated that they would use the RMB over the next 6 months as a trade settlement currency.