Vietnamese traders continue to be positive about future prospects, expecting trading volume to increase over the next six months, according to the latest HSBC Trade Confidence Index report released on Tuesday.

The majority of respondents surveyed in the report said they expected trade volume to increase (70 per cent in 1H11 – the first half of 2011) versus 69 per cent in 2H10 – second half of 2010).

Eighteen per cent of respondents felt that trade volumes would remain stagnant in the next six months while 11 per cent said it would decrease (vs eight per cent in 2H10).

However, this is the second time in a row that the survey has shown a slight decrease in confidence among traders in Viet Nam. In the first half of 2010, the country scored 132 (the peak in five survey periods), but slipped 10 points to 122 in the second half of the year (2H11), and a further six points to 116 in the first of this year (1H11).

The survey also reflected concern among Vietnamese traders about the challenges that lie ahead, especially about fluctuating exchange rates, high interest rates and buyer/supplier risks.

The survey covered a total of 21 markets, including key economies in the Asia-Pacific region, the Middle East, Latin America, North America and Europe. A total of 6,390 trade-oriented small and mid-market enterprises were 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 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.

Respondents in the 21 markets surveyed remained positive on the outlook of trade generally, but expressed more concern about buyer and supplier related risks.

Vietnamese traders also share this concern with a higher proportion believing that the risk of buyers defaulting on payment (22 per cent v 18 per cent) and the risk of suppliers not honouring contracts (10 per cent v seven per cent) will be greater in the coming six months.

They felt the chances were higher that the financial health of buyers and suppliers is likely to deteriorate.

When asked what they would do to overcome the risk of non-payment from buyers, there was a big jump in the number of traders planning to offer flexible terms (38 vs 14 per cent in 2H10) and do less business with particular buyers (25 vs 7 per cent).

Traders also said they would accept smaller orders to reduce transaction exposure, require advance payment and make greater use of trade finance via their banks. Fewer traders are putting their hopes in export credit insurance (4 vs 14 per cent in 2H10), the survey found.

Currency worries

While most traders in the world expect renminbi (Chinese currency) to be among the top three trade currencies in 2011, the US dollar is the currency preferred by Vietnamese traders in the international market.

Hence, more traders (81 vs 74 per cent in 2H10) consider exchange rate volatility the most difficult variable in expanding their trading business, especially with the recent movements in rates in early 2011.

A higher portion of Vietnamese traders expects the impact of exchange rates in the next six months will be unfavourable for their business (77 vs 66 per cent in 2H10).

As inflation surged in the first quarter of 2011, the rising interest rates have become the second most worrying issue for traders when they consider business expansion plans (51 vs 20 per cent in 2H10).

The survey found a decrease in the number of traders naming shipping, logistics and storage costs (29 vs 43 per cent in 2H10) and government trade regulations (27 vs 36 per cent in 2H10) as a major impediment to business growth.

Vietnamese traders still consider Greater China (including China, Hong Kong, Macau and Taiwan) the most important market, with a majority of exporters and importers (57 per cent) continuing to actively trade with the region.

The rest of Asia (41 per cent) and Southeast Asia (36 per cent) were ranked behind Greater China in terms of trade importance.

The HSBC Trade Confidence Index, which was conducted by market research firm TNS between February 17 and March 30, stood at 114 in 1H11 compared to 116 in 2H11.

Source: VNS