The Purchasing Managers Index is closely followed by treasurers and CFOs, but what about the Trade Confidence Index? HSBC commissions a survey twice a year that seeks to assess trade finance confidence.
Similarly to the PMI, the TCI works off a baseline number. A TCI number higher than 100 indicates an overall positive sentiment in terms of expectations of need and access to trade finance over the next six months. For Asia, the index has raised slightly to 113 from 112 in October 2011.
For the period between April 10, and June 1, TNS, a market research company, asked 5,800 exporters, importers and traders from small and mid‐market enterprises globally their views, including:
What CFO’s expect from their export and import volumes
The risk of their buyers defaulting
Are they positive about their access and use of trade finance
How they expect foreign exchange and regulation to impact their businesses
TNS then assigned a numerical value to the answers’ positive or negative implication on trade and compiled an index. The sample for Asia included: 300 companies from Australia, 300 for Hong Kong, 308 for India, 301 for China, 100 for Singapore, 300 for Vietnam, 308 for Indonesia, and 300 for Malaysia.
HSBC argues, as part of their global connections report, that the number 113 indicates that the short term outlook for the global economy has stabilised irrespective of the uncertain economic conditions.
Noel Quinn (pictured), HSBC head of commercial banking for Asia Pacific, said, “Supported by substantial import momentum in India and China, and positive trade sentiment across the region, we remain confident that Asia will continue to drive growth in the global economy.”
Measuring confidence can be a useful indicator. Confident exporters and importers increase orders and trade flow based on their predictions. However, confidence within specific industries and regions will vary widely, and broad sentiment gauges are only useful as a supplement to more concrete data.
An economist at a British bank based in Hong Kong, who did not want to go on record, said “This kind of survey that asks managers to crystal ball gaze. At most they have a one to two month vision on orders, and not much more. The broad trend is clear: China and India will grow, Europe won’t very much, but do they know what will happen in Greece and Spain in next six months, or are they just hoping and guessing (like the rest of us)?”
Treasurers shouldn’t make decisions based purely on TCI, but it can be useful when drawing up a general account of trade in the region, as well as a useful benchmark of how regional peers are feeling.