Most local small and medium enterprises (SME) in the import-export sector have pointed out forex risk as their biggest concern, shows an HSBC survey.
The HSBC Trade Confidence Index reveals 78% of SME respondents said foreign exchange rate volatility was the most difficult variable in growing their trading business, against the 51% in the survey in the first half of this year.
One of the highlights of the survey is the increase in the percentage of traders (66% against 53% in the previous survey) expecting forex rates to leave an adverse impact on their business activity in the next six months while only 9% of traders thought forex rates would be good for their business operations.
The strong volatility of foreign exchange rates is the biggest barrier to import-export business growth, according to 71% of respondents, up from the 48% in the previous survey.
This is followed by the cost of shipping, logistics and storage (43%) and government trade regulation (36%).
Only 20% of traders see rising interest rates as a major threat versus 38% in the first-half survey.
Local traders still consider Greater China comprising Hong Kong, mainland China, Taiwan, and Macau, the most important region, as the majority of Vietnamese exporters and importers (58%) said they would continue actively trading with Greater China, followed by the rest of Asia (38%) and Southeast Asia (34%).
Local SMEs in this survey are less optimistic on trade volume in the next six months as 46% of them believed the trade volume would increase slightly while 23% thought that there would be a significant increase over the same period.
Around 24% of respondents forecast trade volume would remain constant while 8% of them said trade volume would decline, double the 4% in the previous survey.
Given the caution in planning business strategies, the number of Vietnamese traders who said the need for trade finance would increase also dropped slightly, from 74% to 67% in this survey.
More than half of respondents said they would use trade finance from banks, while over one third (34%) rely on their own capital to do business.
When asked what local enterprises would do to overcome non-payment risk from buyers, fewer traders plan to offer flexible terms (14% versus 27% in the previous survey), while 43% said they would control buyer relationships by applying trade finance vehicles via banks, up from the 24% in the previous survey.
There were 36% of respondents saying they would accept smaller orders to reduce transaction exposure. Fewer traders put their hopes on export credit insurance through financial institutions and government-backed schemes.
The HSBC Trade Confidence Index this year covered a total of 17 markets, including HSBC’s key economies in the Asia-Pacific region, the Middle East, Latin America, the U.S., Canada and Europe.
There were 5,124 SMEs asked about their six-month outlook on trade volume, buyer and supplier risks, the need for trade finance, access to trade finance, and the impact of foreign exchange rates and government trade regulations on their businesses.
The results were used to calculate an index ranging from 0 to 200, where 200 represents the highest confidence level, 0 represents the lowest and 100, neutral.
This time, the trade confidence index of Vietnam enterprises dropped 10 points from the previous survey to 122 points which reflects both the caution of Vietnamese traders towards target markets as well as their views on potential challenges ahead, said HSBC. Vietnam ranked fourth among 17 markets of HSBC.
HSBC’s survey is done twice a year through market research firm TNS. There were 300 local SMEs in Hanoi and HCMC taking part in the survey.
The HSBC Trade Confidence Index reveals 78% of SME respondents said foreign exchange rate volatility was the most difficult variable in growing their trading business, against the 51% in the survey in the first half of this year.
One of the highlights of the survey is the increase in the percentage of traders (66% against 53% in the previous survey) expecting forex rates to leave an adverse impact on their business activity in the next six months while only 9% of traders thought forex rates would be good for their business operations.
The strong volatility of foreign exchange rates is the biggest barrier to import-export business growth, according to 71% of respondents, up from the 48% in the previous survey.
This is followed by the cost of shipping, logistics and storage (43%) and government trade regulation (36%).
Only 20% of traders see rising interest rates as a major threat versus 38% in the first-half survey.
Local traders still consider Greater China comprising Hong Kong, mainland China, Taiwan, and Macau, the most important region, as the majority of Vietnamese exporters and importers (58%) said they would continue actively trading with Greater China, followed by the rest of Asia (38%) and Southeast Asia (34%).
Local SMEs in this survey are less optimistic on trade volume in the next six months as 46% of them believed the trade volume would increase slightly while 23% thought that there would be a significant increase over the same period.
Around 24% of respondents forecast trade volume would remain constant while 8% of them said trade volume would decline, double the 4% in the previous survey.
Given the caution in planning business strategies, the number of Vietnamese traders who said the need for trade finance would increase also dropped slightly, from 74% to 67% in this survey.
More than half of respondents said they would use trade finance from banks, while over one third (34%) rely on their own capital to do business.
When asked what local enterprises would do to overcome non-payment risk from buyers, fewer traders plan to offer flexible terms (14% versus 27% in the previous survey), while 43% said they would control buyer relationships by applying trade finance vehicles via banks, up from the 24% in the previous survey.
There were 36% of respondents saying they would accept smaller orders to reduce transaction exposure. Fewer traders put their hopes on export credit insurance through financial institutions and government-backed schemes.
The HSBC Trade Confidence Index this year covered a total of 17 markets, including HSBC’s key economies in the Asia-Pacific region, the Middle East, Latin America, the U.S., Canada and Europe.
There were 5,124 SMEs asked about their six-month outlook on trade volume, buyer and supplier risks, the need for trade finance, access to trade finance, and the impact of foreign exchange rates and government trade regulations on their businesses.
The results were used to calculate an index ranging from 0 to 200, where 200 represents the highest confidence level, 0 represents the lowest and 100, neutral.
This time, the trade confidence index of Vietnam enterprises dropped 10 points from the previous survey to 122 points which reflects both the caution of Vietnamese traders towards target markets as well as their views on potential challenges ahead, said HSBC. Vietnam ranked fourth among 17 markets of HSBC.
HSBC’s survey is done twice a year through market research firm TNS. There were 300 local SMEs in Hanoi and HCMC taking part in the survey.
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