Hong Kong traders remain optimistic about their prospects despite uncertainty stemming from lingering trade tensions, with a sustained period of moderate growth believed to be underway.
The latest Hong Kong Trade Development Council (HKTDC) Export Confidence Index for the third quarter of 2024 found that despite a slight decline compared to the second quarter, underlying sentiment remains broadly positive.
The majority of the sub-indices also remained in expansionary territory, a clear indication of widespread anticipation of continued growth.
"Hong Kong exporters remain resilient despite the uncertainty stemming from lingering trade tensions. Indeed, the majority of respondents reported no – or only minimal – impact from the recent round of trade restrictions and higher tariffs," commented Irina Fan, director of HKTDC Research.
Strong sales and new orders
Based on the quarterly survey results, HKTDC said the overall Current Performance Index rose by 1 point to 52.6, a development seen as reflecting strong sales and new orders, rising unit prices and expanding procurement activities.
Although the Sales & New Orders Sub-Index recorded a moderate 1.8-point drop, it stayed resolutely in expansionary territory at 55.7. The Expectation Index also remained in expansionary territory at 51.4 even after a 2.9-point dip.
"The same traders, however, remained optimistic about the outlook for sales and new orders (with a Sales & New Orders Expectation Sub-Index reading of 54.6) and looked set to continue expanding their procurement activities (Procurement Expectation Sub-Index: 55.4).
An index above 50 indicates an optimistic outlook, and below 50 indicates a pessimistic one.
"Overall, the findings suggest that the immediate future will be characterised by moderate, sustained export growth," HKTDC added.
Cost pressures lessen but remain a major concern
Meanwhile, the report found that costs remained the major drag on exporter confidence in the third quarter.
The Index showed that while both the Current and Expectation Cost Sub-Index showed some improvement, scores remained at about the 35 level, an indication that exporters are still facing strong cost pressures.
In terms of Current Performance, exporters have seen increased Sales and New Orders across all their key markets.
Regarding outlook (Expectation), exporters were most upbeat about the ASEAN bloc (59.7) and mainland China (58.4).
The report said that the industry's current performance improved across all sectors in the third quarter. In terms of prospects for the near term, clothing exporters are the most optimistic at 61.2, followed by Toys (58.7) and Jewellery (56.4).
Looking to the immediate future, Nicholas Fu, senior economist with HKTDC Research, noted that exporters from five out of the six key sectors expect the current positive business momentum to continue.
"Overall, Clothing exporters were the most upbeat, followed by those in the Toys and Jewellery sectors. While it is noteworthy that cost pressures are expected to stay high across all sectors, there is some possibility of a slight improvement further down the line," he said.
In addition to addressing the standard index criteria, the latest survey also focused on several specific thematic questions with regard to the primary challenges facing exporters, including high and rising costs (transport, labour, production and capital) — which were seen as the most significant challenges.
"Regarding the impact of recent trade restrictions and higher tariffs on certain China-origin exports, 60% of respondents reported no impact on their business to date, while 39% expect only a moderate downside," the report added.
The HKTDC Export Confidence Index was introduced in the first quarter of 2024. It is a composite of five sub-indices — Sales and New Orders, Trade Value, Cost, Procurement and Inventory — and seeks to provide a comprehensive overview of Hong Kong exporter sentiment.
