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Thursday, August 4, 2016, 18:53

Confidence among SMEs picks up: Survey

By Lin Wenjie

HONG KONG — Hong Kong small and medium enterprises (SMEs) picked up confidence in the third quarter of 2016 as recruitment sentiment improved, according to a survey conducted by the Hong Kong Productivity Council (HKPC) and sponsored by Standard Chartered Bank Hong Kong.

After declining for three consecutive quarters, the Standard Chartered Hong Kong SME Leading Business Index took a breather with a 0.7-point increment, reaching 41.1 in the third quarter, thanks to the 1.7 point increase in the “Staff Number” sub-index, the quarterly survey finds.

Besides “Staff Number”, which is the only sub-index that turns positive at 51.1, four other components of the overall index – “Sales Amount”, "Profit Margin”, "Investment” and “Global Economic Growth” – all stayed below the 50 threshold that separates contraction from expansion, showing signs of underlying sentiment weakness. “Global Economic Growth” even fell to 16 – the first time on record it has fallen below 20 – reflecting global uncertainties such as Britain's vote to leave the European Union and the coup attempt in Turkey, which continue to weigh on already fragile market sentiment.

Experts believe that Brexit-induced cautiousness has amplified negative outlook on the global economy – but the situation will not worsen in the fourth quarter.

"We believe that external headwinds are bound to start improving, albeit only gradually, later in the year, led by a stabilizing China economy. But in the meantime, we do not see a quick turnaround in business environment for Hong Kong SMEs,” commented Kelvin Lau Kin-hang, senior economist at Standard Chartered Bank Hong Kong.

From an industry perspective, the survey also showed that three major industry sub-indices remained in the contraction territory. The Manufacturing and Retail sub-indices dropped to 37.8 and 38.3, respectively, while Import, Export and Wholesale were up 3.2 points to 37.7, showing improved confidence as the third quarter is the traditional trading season. In comparison, sentiment in the Finance and Insurance industry improved dramatically as a result of a stabilized renminbi.

"It's the first time to have sub-40 readings across all three main industries, and there are no signs of recovery in the three major industries, suggesting no evident economic growth driver for now," Lau said.

Although the impact of Brexit is yet to crystallize, experts warned SMEs to be cautious and advised them to focus on new technology to stimulate business.

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