Trade confidence of Malaysian businesses has fallen to the lowest in recent years as companies, which are cautious on the next six months' outlook, adopt a more conservative approach.
"There are many reasons that attributed to the decline. My belief is that Malaysian businesses had a more cautious approach because of the slowing down in China.
"Nevertheless, I believe that Malaysian businesses' confidence level will rebound soon," said HSBC Bank Malaysia Bhd managing director of commercial banking David Morton at a media briefing yesterday.
Other concerns for Malaysian businesses included rising costs and foreign exchange volatility.
Morton was revealing the results of the recent international survey conducted for the HSBC Trade Confidence Index April 2011.
According to the index, Malaysia ranked the lowest among 21 markets with 97 points.
The index showed that businesses in India are the most bullish about trade prospects in the next six months, with a score of 140 points.
This was followed by Saudi Arabia and Mexico, which scored 132 and 125 respectively. The overall global index was averaged at 114 points.
The index covers a total of 21 markets and is the largest trade confidence survey globally.
The current survey comprises six-month views of 6,390 exporters, importers and businesses from small and mid-market enterprises on various views, such as trade volume, buyer and supplier risks, the need for trade finance, access to trade finance and the impact of foreign exchange on their businesses.
"Overall, global trade confidence is expected to remain positive with intra-regional trade continuing to underpin global trade activity.
"At HSBC, we believe that Malaysia's growth will be driven mainly by domestic demand and recovery of exports.
"The recent liberalisation of administrative rules on foreign exchange transactions in Malaysia will encourage greater efficiency in the conduct of international trade, promote a conducive business environment and at the same time, reduce the cost of doing business," he said.
Interestingly, the survey also revealed that most businesses around the world indicated that the yuan has the potential to become the top three most used trade settlement currencies in 2011.
"Our survey revealed that emerging markets are paving the way for the renminbi to be accepted as an international trade currency, as more businesses, particularly in Asia and Middle East and North Africa, are preparing to use renminnbi to settle trade in the future.
"With our strong links with China, the Malaysian market is likely to consider trading in renminbi," said director of trade and supply chain Ng Wei Wei.