FX jitters bring fear to traders

The HSBC Trade Confidence Index for the second half of 2010, released last week, revealed that

Skittish dong-greenback rates have alarmed firms

exchange rate volatility risks were the biggest fear of 78 per cent of 300 import and export firms  surveyed in Vietnam.

Meanwhile, under a previous survey, the figure of enterprises listing exchange rates the top difficulty for the first half of 2010 was 52 per cent. 

There is also an increasing percentage of traders (66 per cent in the second half survey against 53 per cent in the first half survey), expecting exchange rates to have an unfavourable impact on their businesses in the next six months.

Only 9 per cent of traders thought that exchange rates would have a favourable impact on their businesses.

Notably, 71 per cent of respondents said fluctuating exchange rates was the biggest barrier to import and export business growth.

Some 43 per cent of respondents said shipping, logistics and storage costs and 36 per cent of respondents listed government trade regulations as their biggest fears.

Meanwhile, rising interest rates was not a concern to traders in the second half of 2010 as the percentage of respondents reduced from 38 per cent in 2010’s first half survey to 20 per cent.

To deal with exchange rate volatility, some 43 per cent of traders in Vietnam said they would control buyer relationships by applying greater use of trade finance vehicles via banks.

The percentage doubled against the earlier survey, accepting smaller orders to reduce transaction exposure and often required advance payments.

Many traders also put their hope in export credit insurance through financial institutions and government-backed schemes. Only 7 per cent of traders favoured tightening payment terms and doing less business with particular buyers.

There was a slight decrease in the trade confidence index. Some 22.46 per cent of Vietnamese traders believed trade volumes would only increase slightly in the next six months. 

“As seen from the survey results, banks remain the key source of trade finance in Asia and in Vietnam where nearly 50 per cent of respondents are funding their trade activities via banks,” said Do Thuy Nhu Thuy, head of HSBC Bank Vietnam’s  trade and supply chain.

The HSBC Trade Confidence Index this year covered 17 markets, including key economies in Asia-Pacific, the Middle East, Latin America, the US and Canada and Europe.

Some 5,124 trade-oriented small and mid-market enterprises were asked about their six-month outlook on trade volumes, 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.