Asian Confidence Declines but Trade Flows to Pick Up in 2013

HSBC’s ‘Global Connections’ report reveals that while confidence in the short-term outlook of Asian trade continues to soften, the pace of trade growth in the region is forecast to pick up in 2013. This will give a renewed impetus to trade flows, both within the region and globally. This dip in confidence is caused by a reduction in the number of traders expecting the global economy to stay the same or grow over the next six months.

Noel Quinn, HSBC’s head of commercial banking Asia-Pacific, said: “Although trade growth in Asia has slowed over the past 12 months, the HSBC Trade Forecast predicts that trade will pick up in 2013 and Asia will continue to power the world economy with China and India leading the way in terms of accelerated growth.

“Trade prospects for all the Asian countries will depend crucially on what happens in China and to a lesser extent India. Our forecasts for these two countries show strong growth continuing after the current slow patch, supporting a global recovery. And both of these markets will continue to expand strongly in terms of supporting world GDP [gross domestic product], leading to emerging Asian countries becoming an increasingly important influence on world growth and trade having a pivotal impact on flows of foreign investment between the developed and developing economies.”

The HSBC Trade Forecast reveals that merchandising exports from all countries in Asia will remain robust, led by China, India, and Vietnam, which are all expected to post double-digit annual increases to 2020. Indonesia and Hong Kong are also expected to record double-digit growth in the period 2013-2015, before slowing to 7%-8% in 2016-2020. Although Asian export growth is generally expected to be lower in 2016-2020 than in the near term, some countries will expect a pick-up, namely Malaysia, Bangladesh and Singapore.

According to the HSBC Trade Confidence Index, confidence amongst Asian traders has dipped slightly to 111, down from 113 in the H112. Only 57% of Asian traders expect the global economy to stay the same or grow (versus 66% in H112) and 79% expect their trade volumes to grow or at least maintain the same level (versus 83% in H112). Asian suppliers are still concerned about non-payment, with 24% anticipating an increase in buyer defaults over the next six coming months. Buyers, on the other hand, have more confidence in their suppliers, but with only 18% of buyers expecting non-delivery. The majority (90%) expect their need for trade finance to maintain the same level or increase over the next six months.

Indian (+7), Australian (+6), and Chinese (+2) traders have registered increases in confidence levels over the coming six months. Decreased confidence levels over the short term have been driven by Singapore (-11), Indonesia (-6), Hong Kong (-6) and Vietnam (-5). Asian traders still see Greater China as their most promising region for growth over the next six months followed by southeast Asia and the US. Asian traders continued to cite fluctuating exchange rates as their biggest barrier to growth.

Key market and trade corridor trends from the HSBC Trade Forecast: 

  • China exports are expected to grow 15% annually 2013-15 and 13% a year for 2016-20. Growth in Chinese exports is expected to be most rapid to other economies in Asia over the medium term.
  • India tops the tables for all 23 markets surveyed as either their fastest import or export growth partner out to 2020.
  • Bilateral trade between China and India is set to increase significantly. India will be the fastest expanding market for Chinese products, with export growth averaging 20% a year during 2013-15 and 17% a year during 2016-20. Meanwhile, India exports to China are set to grow 23% between 2013 and 2015 and 19% between 2016 and 2020.
  • South-south trade continues to show up as a trend. Brazil’s fastest growing trade partners are India, Vietnam and China and Mexico’s imports from India and China will grow 13.9% and 13.4% respectively between 2016 and 2020.
  • Bangladesh is forecast to develop its role linking ’emerging Asia‘, driven by trade growth with India throughout the period. Bangladesh’s trade is expected to increase 19% between 2013 and 2015 and 14% between 2016 and 2020.
  • Malaysia is forecast to see strong growth to Latin America in the years to 2020, at approximately 9% in the period 2016-20, underpinned by a greater sophistication in the products imported by the continent, particularly in electronic goods. Malaysia’s exports to Brazil are predicted to grow 14% annualised over the same period.
  • Vietnam is expected to record double-digit annualised trade growth throughout the forecast period 2012-30. China will have overtaken the US as Vietnam’s largest export partner by 2030 but the US, Japan and Korea will remain key sources of demand for Vietnam.
  • Australia’s main export markets are in Asia, and this will continue. Australia’s exports to Asia (ex-Japan) are forecast to grow by 6% a year between 2013 and 2015.
  • Hong Kong’s total exports are forecast to double from 4.8% in 2012 to 11.4% annually throughout 2013-2015. Although China will remain Hong Kong’s most important trading partner, other developing East Asian nations will become increasingly important, with exports to Vietnam set to grow by 8% a year in the decade to 2030.
  • Indonesia exports to the rest of Asia (ex-Japan) are expected to grow at a solid pace of close to 10% a year over the period 2021-2030. The fastest growing trade routes will be to India and China over the medium term (2013-2015), led by their insatiable demand for commodities.
  • Singapore’s exports to Asia (ex-Japan) are forecast to rise by a fairly robust 7% a year on average during 2021-2030. But the fastest growing trade routes will be with China, India and Vietnam over this period.

 

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