EMERGING MARKET TRADE TO DRIVE GLOBAL CONFIDENCE, SAYS HSBC SURVEY

VANCOUVER, Oct. 20 /CNW/ - Canadian businesses express ongoing confidence about the economy and trade growth over the next six months, according to the latest semi-annual HSBC Trade Confidence Index. Though all markets report positive confidence levels, respondents now express slight caution about the global economy as growth stabilizes.

The HSBC Trade Confidence Index is the broadest international survey of small and mid-sized businesses engaged in cross-border trade. Results are framed by respondents in 17 markets: Canada, Australia, Brazil, mainland China, France, Germany, Hong Kong, India, Indonesia, Malaysia, Mexico, Saudi Arabia, Singapore, Vietnam, the United Kingdom, the United States, and the United Arab Emirates. The results used to calculate an index range from 0 to 200, with 200 representing the highest confidence level, 0 representing the lowest and 100, neutral.

As an indication of overall sentiment, global trade confidence remains positive on the HSBC Trade Confidence Index, unchanged at 116. Canadian businesses scored 110 on the index, up from 109 in the last TCI in May 2010.

Businesses in India (140), UAE (125), Mexico (124) and Indonesia (124) are the most bullish about trade prospects in the next six months. Following them are Vietnam (122), Brazil (122), Saudi Arabia (118), Malaysia (114) and China (111). Comparatively, the mature markets of Canada (110), Australia (110), the UK (109), the United States (108), Germany (107), France (106) and Hong Kong (106) all figured within the positive range, albeit lower on the scale, demonstrating improving confidence.

Across all markets, respondents point to Greater China as providing the strongest growth prospects in the next six months, solidifying its key role in the new global economy.

Bill Nowicki, Executive Vice President, Head of Trade and Supply Chain, HSBC North America said: "Global trade confidence remains securely in positive territory across all surveyed markets, despite prolonged uncertainty in developed markets and moretempered growth in the emerging world. Echoing intra-regional trade trends globally, trade between Canada and the U.S. continues to be strong; however the new trade paradigm suggests that emerging markets will drive future global trade growth and companies looking to maintain long term profitability may want to consider emerging markets as important areas for growth."

Trade between U.S. and Canada continues to build. More than eight out of ten (86 per cent) of U.S. businesses identified Canada as the nation with which they do the most trading. This is a significant increase since this time last year, when only 65 per cent of respondents identified Canada as their most frequent trade nation.

Barriers to trade improving
Canadian businesses see the barriers to trade improving; however they still express concerns with the impact of fluctuating exchange rates, costs of essential services such as logistics, shipping and storage, as well as lack of product demand could have on future trade growth.

Canadian banks seen as primary channel for trade finance funding
As the economy stabilizes and opportunities improve, importers and exporters are increasingly turning to banks for their trade finance funding needs. As a result, there will be less focus on suppliers as a source for funding buyers' working capital.

Rising 16 per cent from May 2010 Trade Confidence Index, 54 per cent of Canadian businesses today cite their bank as a main channel of funding for trade needs. Self-funding also rose from 26 to 32 per cent, and now sits as the second most important channel for trade financing.

Foreign exchange
As foreign exchange rates have stabilized over the last six months, the impact on trade has improved slightly. More specifically, neutral and favorable ratings on impact of exchange rates improved while the very unfavorable rating dropped. Fluctuating exchange rates saw a 6 per cent drop as the chief barrier to trade over the past six months; a sign that Canadian companies are feeling the positive effect of stability.

Global economic outlook
Canadian businesses have an improving and optimistic trade outlook coupled with a more tempered view of the global economy, as compared to the May 2010 Trade Confidence Index results. In fact, 48 per cent of Canadian businesses are optimistic that trade volume - in the form of sales and new orders - will increase over the next six months, while roughly the equivalent number (44 per cent) feel it will maintain current levels.

However only 48 per cent believe the economy will grow over the next six months, compared to 64 per cent in May 2010.

About the survey
The semi-annual HSBC Trade Confidence Index gauges sentiment and expectations on trade activity and business growth in the next 6 months from 5,124 exporters and importers across 40 cities in 17 countries. The survey was conducted from July to September 2010. The error rate is +/- 4.0%, at a 95 per cent confidence level.

About HSBC
HSBC Bank Canada, a subsidiary of HSBC Holdings plc, has more than 260 offices, including over 140 bank branches, and is the leading international and trade finance bank in Canada. With around 8,000 offices in 87 countries and territories and assets of US$2,418 billion at 30 June 2010, the HSBC Group is one of the world's largest banking and financial services organizations.

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