Sharp fall in overseas credit searches show Singapore firms turned wary of venturing abroad

SINGAPORE - Overseas commercial searches by local firms fell sharply for the second consecutive year as they turned more cautious about venturing abroad amid global uncertainties and tough economic conditions.

According to the latest survey by Singapore Commercial Credit Bureau (SCCB), these searches by Singapore businesses fell by a sharp 19.13 per cent in 2015. This represented an accelerated decline from the previous year when overseas credit searches fell by 12.83 per cent in 2014.

"Over the past year, we have seen a visible decrease in overseas credit searches by Singapore companies, as firms are more cautious and have scaled back their overseas expansion plans given the global uncertainties and tougher economic conditions," said SCCB chief executive officer Audrey Chia.

"However, our findings also revealed that foreign searches on local companies have increased which points to the fact that foreign investment interest in local markets has remained strong," she noted.

Credit searches made by foreign companies on Singapore firms rose significantly by 36.97 per cent in 2015 over the previous year. European Union countries accounted for the highest proportion of seaches, followed by North America and East Asia.

Said Ms Chia: "With the growing clout of trade blocs within Asean and beyond, we foresee an increasing need for local firms to rise above the competition and be recognized for their credibility in the global arena."

The SCCB survey also showed that the credit quality of local firms remained largely mixed in 2015.

A visibly higher proportion of firms experienced an unchanged credit rating, which consists of both financial strength and risk indicator components. While the proportion of firms which saw deterioration in financial strength was lower than those which saw improvements, a higher proportion of firms saw a decline in their risk standing compared to those which experienced improvements.

According to SCCB, the proportion of firms which experienced deterioration in financial strength accounted for slightly more than one-tenth of firms at 10.93 per cent while those which saw improvements made up slightly more than two-fifths at 40.43 per cent. Meanwhile, close to half of firms experienced unchanged financial strength at 48.64 per cent.

On the other hand, the proportion of firms which saw improvements in risk indicator formed the minority, accounting for a mere 15.01 per cent compared to those which saw downgrades accounting for 21.11 per cent. Firms which experienced an unchanged risk indicator accounted for more than half of the firms at 63.88 per cent.

"The deterioration in credit ratings stems largely from declines in the risk scores of firms in Singapore amid the global uncertainties," said Ms Chia. "Out of every 100 firms, an average of 20 firms has had their risk indicator scores downgraded over the past year.

"However, we are also seeing a higher proportion of improvements in terms of the financial strength of firms. Hence, there should be no cause for alarm as the credit ratings are also evaluated based on a company's merits and fundamentals."