Cautious Business Optimism Reigns In Malaysia For Q3, Says D&B Malaysia

 (Bernama) –  However, growing signs of moderation in optimism levels were evident in the third quarter compared to the previous quarter.

Despite the looming effects of a weakening external trade demand, domestic growth has maintained a vigorous pace and is poised to remain strong in the coming months, said Dun & Bradstreet (D&B) Malaysia.

It said in a statement Monday that following the rush of business optimism in the last quarter, firms in Malaysia are upbeat about their businesses for the third quarter.

“Domestic conditions remained favourable for firms in Malaysia for the third quarter as evident from the healthy sentiments we are seeing. However, the local economy is still largely export-driven and dependent on foreign investments.

” This implies a greater vulnerability to downside risks, especially within the context of a weakening external trade demand. Our projections are likely to be cautious in the months ahead,” said D&B Malaysia’s Marcom and Product Manager, Eugene Zachariah, in commenting on the overall state of business optimism in Malaysia.

The D&B statement also said the company’s latest Business Optimism Index (BOI) study showed that all six leading indicators, namely volume of sales, net profits, selling price, inventory levels, employees and new orders, have remained in the expansionary region.

However, growing signs of moderation in optimism levels were evident in the third quarter compared to the previous quarter.

Optimism levels for new orders by manufacturers remained high at 37.5 percentage points, showing marginal decline by 2.5 percentage points from 40 percentage points in the second quarter.

Hiring expectations for the third quarter posted lower optimism levels at 25.8 percentage points, compared to 34.6 percentage points from the second quarter.

Business leaders are least optimistic about selling prices and inventory levels. Selling prices are expected to increase marginally to 2.5 percentage points, while inventory levels are likely to increase to 5 percentage points.

This represents a significant decrease from 14 percentage points and 10.8 percentage points respectively for both indicators in the second quarter.

From a sectoral perspective, the services and manufacturing industries have emerged as the most optimistic sectors with all leading business indicators in the expansionary region.

The wholesale sector ranks third, with four business indicators in the expansionary region and one remaining unchanged, whilst the agricultural sector ranks last with only one business parameter in the expansionary region, two parameters in the contractionary region and one parameter remaining unchanged.

The financial sector takes the biggest tumble to the second least optimistic sector, with only one business parameter in the expansionary region, compared to three in the previous quarter.

Following Bank Negara Malaysia’s stricter personal financing policies to curb lending growth under the Financial Services Act(FSA), non-banking financial institutions are reportedly expecting a lower demand for personal loans.

D&B Malaysia’s net optimism levels for volume of sales and net profits of the financial services posted steep declines to -28.6 percentage points and 0 percentage points respectively.

Selling price and inventory levels of the financial sector have remained flat at 0 percentage points. Hiring levels have also declined from 42.9 percentage points to 14.3 percentage points.