Small and mid-market exporters and importers in mainland China and Indonesia are the most optimistic in their trade outlook for the next three months, according to a report by HSBC.
Positive signs in the east are leading to hopes of a worldwide economic rebound. “We are seeing signs of what could be the start of a global trade recovery: trade volumes have stabilised and are posting notable growth in certain markets," comments Lawrence Webb, HSBC global head for trade and supply chain.
“Our survey shows that globally, traders expect more orders and better access to credit and hold a stable outlook on buyer and seller risks,” he adds.
The latest HSBC trade confidence index has surveyed a total of 12 markets, including key economies in the Asia Pacific region, the UAE, Brazil, the UK and the US. Firms were asked about their trade volumes, access to trade finance and the impact of foreign exchange on their business, among other topics.
The most positive responses were from mainland China, Indonesia, followed by the UAE, while the most significant increases in confidence were seen in Hong Kong, Singapore and Australia. In Asia, and particularly in mainland China, the positive responses have partly been put down to the large-scale government stimulus packages that have boosted confidence and increased cross-border trading of commodities, construction materials and equipment.
“Growing intra-Asia trade and stronger domestic consumption are also signs of economic recovery,” Webb adds.
However, he clarifies that it is too early to tell if the rebound is sustainable in Asia, with long-term recovery dependent on an economic revival in the west.
Further results of the survey found that more respondents worldwide (44%) expected trade volumes to grow significantly than those who expected a contraction (15%). Approximately one-third of respondents expect their need for trade finance to increase, especially in India, South-East Asia and the UAE.
Over half (59%) said they expected good access to credit, and around a third believed that access to trade finance will increase.
At least four out of 10 believed that banks will be able to meet their future trade finance needs, with only the UK standing out as the exception, where 45% of firms reported they would rely on their own capital, compared to 29% who would turn to their banks for support.
The majority of surveyed companies also predicted that buyer default risk and supplier non-delivery risk will remain stable. But, respondents displayed greater concern about a possible increase in buyer risk than supplier risk.
“In a downturn, concerns relating to seller risk tend to be less pronounced than those related to buyers’ default risk,” comments HSBC’s Webb.
“We continue to see exporters planning to use their banks’ trade finance solutions to manage the buyer risk, especially in India and the UAE. Advance payment terms stand out as a risk management strategy in South-East Asia and the US. In Australia, the UK, Brazil and Greater China, traders are looking to use export credit insurance.”
Webb adds that this heightened risk perception surrounding buyer risk calls for greater intervention from governments to help mitigate some of these risks.
“There is a role to be played by government-backed insurance schemes to address this need for risk management as appetite and capacity from private insurers to underwrite such risk remains significantly constrained,” he explains.
Other challenges facing the market include volatile foreign exchange conditions and weak product demand, both problems cited by traders as obstacles hindering their growth.
Foreign exchange volatility was a top concern for respondents in Brazil, followed by the UK, South-East Asia, and Greater China.
Lack of demand was the major problem raised in the US and Australia. While, in India and the UAE, traders were concerned by insufficient profit margins and credit availability.
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