Canadian small and medium-sized enterprises (SMEs) are still dependent on the US for the bulk of their business emerging markets are attracting more of their efforts, according to the latest HSBC Trade Confidence Index.
VANCOUVER: Canadian small and medium-sized enterprises (SMEs) are still dependent on the US for the bulk of their business but emerging markets are attracting more of their attention, according to the latest HSBC Trade Confidence Index.
The HSBC Bank Canada said 96% of Canadian companies look to the US as a trade partner, but they’re increasing relationships with other regions, such as Southeast Asia (7%), Latin America (7%), Greater China (6%) and Western Europe, excluding the UK (6%).
“For future growth, diversification beyond traditional markets will be a key strategy. Canadian companies are turning more and more to opportunities in emerging markets because the economic environment in the US remains fragile, and because the strength of the Canadian dollar makes Canadian goods more expensive for US importers,” said Mark Watkinson, senior executive vice-president, head of commercial banking, North America.
The index is an international survey of SMEs engaged in cross-border trade involving 21 global markets.
Thirty-eight per cent of the Canadian companies surveyed said the US remains the most promising region for trade growth over the next six months. This represents a 17% drop from the October 2010 survey. Top growth spots include Greater China (18%), Latin America (10%), Southeast Asia (6%) and Central and Eastern Europe (5%, excluding Germany).
Canadian SMEs see global prospects improving over the next six months according to 57% of the respondents. That’s a 9% increase from the October report.
However, almost one fifth of them are concerned about fluctuations and increases in the cost and availability of raw materials, which has increased their concern that suppliers won’t honor trade agreements.
For their part, suppliers expect a slight increase in the risk of buyers defaulting on payments, and they will increasingly turn to options such as advance payment, tightened payment terms and export credit insurance in order to mitigate their risk.
With the loonie sitting above parity with the US dollar, 41% of respondents predict foreign exchange fluctuations will be unfavorable, compared to 33% in October.