The number of compulsory winding-up petitions for businesses fell to 69 last month from 83 in April. However, it was five more than in May last year. The number of compulsory winding-up petitions in the first five months of the year, 319, was more than a third higher than the 235 in the same period last year.

'The numbers are less ugly but it's not positive news. Year on year, it's still a big increase,' Hong Kong General Chamber of Commerce chief economist David O'Rear said.

Mr O'Rear said he hoped government measures to shore up bank lending to businesses would have a positive effect.

Earlier this week, the government started guaranteeing 80 per cent of qualified bank loans, up to a maximum of HK$12 million per company, in a bid to encourage banks to offer credit facilities that had been stalled by the global financial meltdown.

In the first three months of this year, Hong Kong's economy shrank year on year for the second consecutive quarter and suffered its fourth straight quarter of quarter-on-quarter contraction.

The government is now forecasting a contraction of between 5.5 per cent and 6.5 per cent in full-year gross domestic product, far worse than its earlier forecast of a fall of between 2 per cent and 3 per cent.

Despite the unprecedented destruction of household wealth and deterioration of global trade amid the downturn, bankruptcy data is a lagging indicator and does not necessarily reflect the impact of the current financial crisis.

Generally, as the economy improves, the fortunes of households and businesses are revived, and their debt burden is lighter. In a downturn, the reverse is true, although this may not be immediately evident in the bankruptcy numbers.

During the Sars outbreak six years ago, the number of monthly personal bankruptcy petitions regularly soared above 2,000 but it averaged only several hundred in the aftermath of the Asian financial crisis.