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MARKETS & INVESTING | Staff Reporter, Singapore
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Credit searches by Singaporean firms rose 3.04% in 2017

These were fuelled by overall trade growth in 2017.

Overseas credit searches by Singapore rebounded and rose by 3.04% in 2017 after a 1.16% decline in 2016, thanks to a turnaround in overall trade growth in 2017, the Singapore Commercial Credit Bureau (SCCB) revealed.

According to SCCB data, the ASEAN region accounted for the highest proportion of overseas credit searches by Singapore firms for the fifth consecutive year, followed by East Asia and Europe. “Both ASEAN and East Asia saw a slight uptrend in overseas searches made in 2017 compared to 2016. According to SCCB, the proportion of credit searches made on ASEAN companies rose slightly from 27.17% in 2016 to 27.74% in 2017,” the firm said.

Malaysia, Indonesia and Thailand registered the most credit searches within ASEAN as the three countries were Singapore’s top ASEAN trading partners for 2017. Credit searches on East Asian companies have also increased, climbing marginally from 26.70% in 2016 to 26.79% in 2017. China, Hong Kong and the Republic of Korea were the most searched countries in East Asia by Singapore firms, as they were the top trade destinations in East Asia.

Meanwhile, credit searches on Europe have declined for the second consecutive year, down from 13.13% in 2016 to 12.51% in 2017. The UK, Italy and Germany were the most searched European countries by local firms.

“A comparison between IE Singapore’s latest trade annual trade figures and SCCB’s findings showed that 10 of the 20 most searched countries matched those in IE Singapore’s list of top 10 exporting countries with a further 5 countries matching the top 20 most searched countries for 2017,” SCCB said. It also noted that credit searches made by foreign companies on local firms have increased visibly by 12.85%, compared to the 1.21% decline in 2016. Europe registered the highest proportion of credit searches done on Singapore companies, followed by North America and East Asia.

According to SCCB, credit searches by European companies have increased from 26.56% in 2016 to 39.98% in 2017, led by the United Kingdom, Germany and Netherlands. Credit searches by North American companies accounted for the second highest proportion of searches (22.6%), followed by East Asian companies (16.91%).

SCCB also noted that their findings revealed some correlation between Singapore’s top import partners and countries conducting the most searches on Singapore companies. “A comparison between IE Singapore’s latest import figures and SCCB’s findings showed that eight of the top 20 most searched countries matched those in IE Singapore’s list of top 10 import destinations, with a further 5 matching the top 20 for 2017,” it said.

SCCB CEO Audrey Chia noted that the improved trade environment in 2017 has encouraged higher levels of credit vigilance among local firms over the past year. “This is especially the case for the rise in overseas searches done on companies.in ASEAN and East Asia. Whilst credit searches on European companies have declined slightly, we would expect due diligence activities to pick up in 2018 with the ratification of the bilateral trade and investment deal between Singapore and the EU in the coming months,” she said.

Moreover, as with 2016, the majority of Singapore firms have experienced an unchanged credit rating in 2017. The credit rating comprises of both financial strength and risk indicator components.

SCCB concluded that on the overall, risk standing of local firms has improved. “The proportion of firms which experienced a decline in risk standing decreased slightly from 18.41% in 2016 to 15.13% in 2017 whilst the proportion of firms which experienced improvements increased from 13.64% in 2016 to 23.70% in 2017. However, the proportion of local firms with a deterioration in financial strength has increased approximately three times from 10.26% in 2016 to 30.04% in 2017. Conversely, significantly fewer firms saw improvements in financial strength, sliding from 31.19% in 2016 to 10.14% in 2017,” it said.

Chia added, “The deterioration in financial strength of companies generally reflects the spillover effects of weaker business conditions seen in 2016 and 2017. Moving into 2018, we expect the fundamentals of companies to strengthen moderately.” 

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