The latest HSBC Global Connections Report shows trade flows are expected to strengthen in Malaysia in the short term, with most of the TCI survey respondents holding a broadly positive outlook over the next six months.
HSBC Malaysia global trade and receivable finance head Vincent C Sugianto said that although Malaysia’s TCI had dropped three points to 110 since the first half of this year, the index remained firmly above the neutral 100 threshold.
Explaining the drop in Malaysia’s TCI, he said some respondents voiced increasing worry over the impact of Government regulation, “perhaps reflecting concerns over the upcoming Goods and Services Tax (GST)”.
He said they were also concerned over the impact of fluctuating exchange rates on bilateral trade flows in the coming months.
However, Sugianto noted that despite these short-term concerns, the business environment in Malaysia had “improved dramatically” in recent years as reflected by Malaysia’s significant rise to sixth place in the World Bank’s Ease of Doing Business Survey in the 2014 edition.
“With global demand poised to accelerate in the near future, a stable and competitive business environment should boost foreign direct investment and provide a strong base from which Malaysian businesses can expand into other fast-growing emerging markets,” he said.
Sugianto also noted that Asia remained overwhelmingly the land of opportunity for Malaysian businesses, with 81% of the 5,200 TCI survey respondents from 23 markets identifying Asia as having the best opportunities for growth over the next six months.
He said nearly a quarter of businesses identified China as the country they traded with most, while the US dollar remained the main trade settlement currency.
Over the long term, Sugianto said demand for Malaysian exports should remain strong with the country’s Asia-centric focus set to continue as rising incomes across the region drove strong growth in bilateral trade flows.
“Asia remains a key trade focus for Malaysia as the region emerges stronger than ever.
“As Malaysia drives towards achieving developed economy status by 2020, our position in Asia’s growth story will only continue,” he said.
Beyond Asia, he said solid export growth to the United Arab Emirates was a development that could provide further diversification opportunities, particularly for the high technology sector.
China, which overtook Singapore as Malaysia’s largest export market in 2013, would strengthen this position over the next 16 years, Sugianto said.
He added that the anticipated modest slowdown in China was not expected to inhibit a rapid expansion in bilateral trade flows.
“China will solidify its position as Malaysia’s largest export market with export growth in excess of 12% per annum expected until 2030,” he said.
In a special focus on energy, the biannual report said the sector was expected to grow by 5.3% per annum until 2030 as Malaysia continued to strengthen its position as a major international hub for oil and gas production.
HSBC Malaysia project finance head Michael Cooper said that Malaysia was located strategically with a rich supply of oil and natural gas.
“As energy demands continue to rise both within Asia and globally, Malaysia will be able to take advantage of this to continue solidifying its position in the global energy market,” he said.