S'pore firms doing more overseas credit searches

Stronger global trade outlook spurs interest and vigilance; most checks on Asean firms

The stronger global trade outlook is reigniting Singapore companies' interest in doing business with - and conducting due diligence on - their overseas counterparts, especially in the region.

Overseas credit searches by local businesses rose by 3.04 per cent last year following a 1.16 per cent decline in 2016, according to the Singapore Commercial Credit Bureau (SCCB).

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.

The proportion of credit searches made on Asean companies rose slightly from 27.17 per cent in 2016 to 27.74 per cent last year. Malaysia, Indonesia and Thailand registered the largest number of searches within Asean by Singapore firms.

The share of credit searches on East Asian companies also went up, climbing marginally from 26.7 per cent in 2016 to 26.79 per cent last year. China, Hong Kong and South Korea were the most searched, according to the SCCB.

Credit searches on European firms fell for the second straight year, from 13.13 per cent in 2016 to 12.51 per cent last year. Britain, Italy and Germany were the most-searched European countries.

Meanwhile, credit searches made by foreign companies on local firms surged 12.85 per cent last year, compared with a 1.21 per cent decline in 2016.

VIGILANCE ON THE RISE

The improved trade environment in 2017 has encouraged higher levels of credit vigilance among local firms over the past year.

SCCB CHIEF AUDREY CHIA, on the rise in overseas credit searches by local firms.

Europe registered the highest proportion of credit searches done on Singapore companies, followed by North America and East Asia.

"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," said SCCB chief executive Audrey Chia.

"While 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 European Union in the coming months."

The SCCB also found credit ratings, comprising financial strength and risk indicators, unchanged for most Singapore firms last year.

However, the proportion of local firms with a deterioration in financial strength increased from 10.26 per cent in 2016 to 30.04 per cent last year.

At the same time, significantly fewer firms saw improvements in financial strength, with the number sliding from 31.19 per cent in 2016 to 10.14 per cent last year.

"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," Ms Chia said.

A version of this article appeared in the print edition of The Straits Times on March 21, 2018, with the headline 'S'pore firms doing more overseas credit searches'. Print Edition | Subscribe