x Abu Dhabi, UAEMonday 24 July 2017

UAE companies optimistic on trade growth

An international survey has found that local companies are the most confident about expanding trade.

An international survey has found that local companies are the most confident about expanding trade, with growth in the next six months expected to be driven by the Middle East and greater China. Their optimism on trade increased more than in the other two main re-export centres of Singapore and Hong Kong, results from HSBC's semiannual trade confidence index showed. The index measures sentiment and expectations on trade activity and business growth every six months.

"Trade will be a key driver of an economic recovery the UAE is beginning," said Simon Cooper, the chief executive of HSBC Middle East. "We are seeing a continued increase in the optimism and the willingness of traders in the UAE to grow their business." Trader sentiment in the country rose from 118 points in the previous index to 134 out of a total score of 200 in the latest survey conducted between February and March. India, with a reading of 133, and Vietnam, at 132, were the next highest in the survey of 17 countries.

It said 56 per cent of UAE respondents expected trade business to pick up in the next six months, with a further 31 per cent expecting it to remain at current levels. Sixty one per cent of those surveyed said they expected their need for trade finance to increase in the period, with 55 per cent expecting improved access to trade finance. Availability of credit and access to liquidity was highlighted as the top barrier to traders importing and exporting, ahead of concern about a lack of product demand.

Although banks remain the main providers of finance, the number of traders using credit offered by suppliers increased, demonstrating its growing role as an important source of funding. "To an extent, this is a reflection that liquidity in the UAE is tight and possibly the cost of financing in the UAE maybe higher than other markets, so buyers have taken advantage of that by using structured products," said Kersi Patel, HSBC's regional head of trade and supply chain in the Middle East.

Although bank lending edged 0.4 per cent higher in March from the previous month, according to the latest Central Bank data, banks were expected to remain cautious about extending finance until they had a better idea of when the number of bad loans would peak. The Middle East and greater China, comprising China, Hong Kong, Macao and Taiwan, were pinpointed by traders as the most promising regions for trade growth in the next six months. The Emirate's central geographic position should mean it benefits from the re-export trade between the two fast-growing regions.

China has already overtaken Germany to become the globe's biggest exporter and is vying to become the biggest consumer market in the world. In the last decade, the Middle East has seen trade with Asia grow by 40 per cent, faster than with Europe or the US. China's growing demand for oil is benefiting the region as the price of crude strengthens. A total of 68 per cent of UAE respondents said they felt government trade regulations would have a positive impact on their business, higher than elsewhere in the world.

The updated companies law, which would allow an increase in foreign ownership for companies in certain sectors such as services, would help to further boost traders' confidence this year, said Sheikha Lubna Al Qasimi, Minister of Foreign Trade. "The report provides the state with an opportunity to improve its plans and strategies to maintain the UAE's status as an outstanding global commercial hub and investment destination," she said.

Globally, business sentiment in the countries surveyed averaged 116 points. Emerging markets were more optimistic, scoring an average of 122 points, compared with 106 for developed markets. tarnold@thenational.ae