The majority of small and medium-sized enterprises (SMEs) in Asia expect local economic growth in 2008 to be at the same pace or even better than in 2007, supported by strong domestic demand and trade within the region, a new survey by HSBC has found.

The survey covered more than 3,000 SMEs in 10 countries and territories. It found that India is the most positive region for SMEs across a variety of key indicators. And SMEs in Taiwan province also revealed a bloom in optimism due to the improving political situation on the island. But the Republic of Korea (ROK), it seems, is more cautious.

Respondent companies were asked about their local economic outlook for the next six months, their plans to increase or decrease capital investment, and their number of employees. Inquiries also included expectations for trade volumes with the mainland, the rest of Asia and the rest of the world.

Most of the companies said they plan to maintain or increase their staff levels and continue with capital investments. And they still expect trade to grow, according to the commercial banking department of HSBC, which conducted the survey in May.

The responding enterprises are based in Hong Kong SAR, Taiwan province, Bangladesh, Singapore, India, Vietnam, ROK, Malaysia, Indonesia and on the mainland.

Margaret Leung, global co-head of commercial banking at HSBC, said Asia's small business sector is still doing well on exports and healthy domestic demand.

"Asian trading companies do not rely on exports to the US as much as they used to," she told reporters yesterday. "Besides, the US technology sector still maintains its strong position in the global market, despite an economic slowdown, and many Asian exporters to the US are technology or software product manufacturers."

While the region is not immune to global economic factors, Asian SMEs still expect growth on robust domestic demand and an upbeat trade outlook within Asia, she said.

Buoyed by high economic growth, India's smaller businesses are the most optimistic, with nearly 60 percent of respondents saying the country's economy will jump by 4 percent or more.

The mainland and Taiwan province are the second- and third-most optimistic with regard to the next six months. They are followed by Hong Kong.

Vietnamese companies are the most willing to widen their capital expenditures. About 24 percent will increase expenditures significantly, and 30 percent will increase them a little bit, the survey shows. Bangladesh and India also have bigger investment plans than their peers in the region.

The ROK and Hong Kong are the most cautious in terms of capital expenditures, as 48 percent and 25 percent of companies there, respectively, will reduce their investments in the coming months.

(HK Edition 07/16/2008 page2)