Taiwan’s small and medium-sized enterprises (SMEs) have become less optimistic about the business outlook for the first half of this year than they were six months ago, as soaring raw material costs and a stronger local currency have dampened earnings, according to a survey by HSBC released yesterday.
The Taiwan Small Business Confidence Monitor, part of a semi--annual survey on global small business sentiment, stayed marginally above neutral at 101 for the fourth quarter, a fall from the 103 -previously polled, as a majority of firms voiced concerns about increasing raw material prices and foreign exchange volatility.
The latest score rendered Taiwan a drag on the global score of 114 and the Asia index, which reached 125.
Russell Liu (劉政瑩), head of HSBC commercial business banking in Taiwan, attributed the changing sentiment to the nation’s dependence on the US and China amid a global technology correction cycle.
“Taiwan scored the lowest level of confidence among Asian countries,” Liu told a media briefing. “That bucked the regional trend, but matched the economic slowdown in China and North America.”
The confidence reading for China slid from 123 to 121 and from 119 to 108 for North America, the survey found. More than 50 percent of Taiwanese exports go to China and the US.
The sentiment index in Singapore, a regional trade rival, rose to 149 from 136, while in Hong Kong it climbed from 105 to 107, the survey said. Liu linked the rosy readings to expanding domestic demand.
Growing raw material costs topped the concerns of -Taiwanese SMEs, listed by 58 percent of respondents, followed by foreign exchange rate fluctuations at 57 percent, the survey indicated.
Some 34 percent expressed uncertainty about the global economy and 29 percent are worried about inflation, according to the survey.
“The findings correspond with the fact that 54 percent of Taiwan’s SMEs have cross-border business activities, higher than the 30 -percent global average,” Liu said. “But many don’t have a strategy to deal with currency exposure.”
Of the firms that engage in international trade, 50 percent aim to boost revenue, 35 percent intend to diversify business and another 34 percent seek to tap new customers, the survey said.
To achieve that, 27 percent plan to increase capital expenditure in the first half of this year, while 14 percent would enlarge their staff, the survey indicated.
Liu said the findings should help domestic demand and overall economic performance this year.
Furthermore, 31 percent of Taiwanese SMEs expressed a need for more information on foreign exchange risks and regulations, while 30 percent said they need advice on reaching out to customers overseas, the survey showed.
The confidence survey, initiated in the fourth quarter of 2007, had 6,383 samples from 21 economies across the world. A score above 100 indicates optimism and a reading below that shows pessimism.