The overall findings of the survey indicated that corporates displayed a slightly higher positive outlook with an index of 56.9, compared to SMEs, which recorded an index of 53.2.

An index of above 50 indicates a positive sentiment while one less than 50 indicates a negative sentiment.

The index measures the corporates and SMEs’ forward looking expectations on key aspects which include turnover, profitability, hiring, business expansion, capital investment, capacity utilisation and access to bank financing.

RAM Rating Services Bhd economist and head of research Kristina Fong said that although SMEs are still optimistic about business expansion in the next six months, they may be more risk-averse compared to their larger corporate counterparts.

“[SMEs] may need more reassurance of the continuation of positive momentum in their business prospects before actually undertaking capital investment projects.

“Most of their expansion for now is expected to take place through more hiring activities and increased capacity utilisation,” she told reporters at a news conference in conjunction with the release of the survey findings yesterday.

SMEs recorded a mildly positive sentiment of 51.3 for business expansion intentions and 51.9 for capacity utilisation. In comparison, corporates recorded 60 for business expansion and 62.2 for capacity utilisation.

In contrast, SMEs recorded a more positive sentiment at 58 on access to bank financing compared to corporates, which fell short of the 50 neutral point at 45.3.

“Larger corporates are already more highly leveraged than SMEs and, as such, may not be in a position to take on more debt...loans may be more accessible to SMEs as banks have been more eager to grow their SME portfolios on account of better margins,” said Fong.

When contacted, SME Association of Malaysia national president Datuk Kang Hua Keong agreed with the survey’s findings on SMEs.

“The main problem that is hindering SMEs from expanding is shortage of labour; though the government has announced incentives for SMEs in Budget 2017, there is lack of support when it comes to labour.

“First, the SMEs had to deal with [the repercussions] from the goods and services tax, then there was the freezing of foreign labour and most recently the shift of foreign worker levy payment to the employers. All these, coupled with a weak ringgit, are adding to the cost of doing business for SMEs.

“Yes, we may have better access to bank financing compared to the corporates, but [expansion is stagnant] for SMEs due to the shortage of manpower,” he said when contacted by The Edge Financial Daily.

On the Malaysian labour market, RAM Holdings group chief executive officer (CEO) Datuk Seri Dr K Govindan said that only two sectors, namely oil and gas and financial services, saw a softening with retrenchment exercises conducted in 2016.

Fong added that from a macro statistics perspective, there is expected to be some normalisation in labour conditions 1H17.

“By doing this survey, we actually saw positive sentiment towards hiring,” she said.

Corporates registered 62.6 and SMEs came in at 53.9 on hiring sentiment.

For corporates, RAM Ratings noted that all five major sectors, namely agriculture and mining, construction, manufacturing, transport and storage, and wholesale, recorded indices above the benchmark of 50, signalling a general sense of optimism among corporate Malaysia in the next six months.

“The corporate manufacturing sector recorded a notable positive sentiment of 56.5, as firms are likely anticipating a recovery in external demand along with a continuation in support provided by domestic demand,” said Fong.

The less positive sentiment was attributed to the wholesale sector at 54.

The surveys, to be conducted quarterly, will make the RAM Business Confidence Index a barometer of future economic activity, the rating agency said.

Survey respondents included 2,073 SMEs with an annual turnover of below RM50 million, and 801 corporates with an annual turnover of RM50 million (US$11 million) and above. Among these 801 corporates were 10 public listed companies, as well as subsidiaries of listed companies.