HK exports on course to shrink as confidence falls

The outlook for goods shipments in the next five to 10 years is grim, trade council survey finds

PUBLISHED : Tuesday, 18 September, 2012, 12:00am
UPDATED : Tuesday, 18 September, 2012, 7:32am

The value of Hong Kong's exports this year is expected to fall for the first time in three years as the confidence level of local exporters slips to a new low, according to the Hong Kong Trade Development Council.

And the prospects for Hong Kong's merchants are looking dimmer yet over the next five to 10 years.

The council said it was lowering its forecast for exports and is now estimating a 1 per cent contraction for the year, compared with an earlier estimate of 1 per cent growth. Some 98 per cent of Hong Kongs' goods exports are re-exports of goods imported from the mainland.

Economic uncertainties in the euro zone and a slowing mainland economy dragged its export index, an indicator of local exporters' confidence, to a new low of 35.3 in the third quarter. This compared with 47.2 in the second quarter and 43 in the first quarter. A reading of 50 or above indicates expansion.

"We had hoped there would be a turnaround in the third quarter, given the positive sentiment in the second quarter, but now the outlook simply isn't good," said Edward Leung, the development council's director of research.

Exporters of machinery were the most pessimistic, followed by those in the electronics and clothing sectors. Jewellery traders were relatively less gloomy.

A third round of quantitative easing (QE) announced by the United States Federal Reserve last week may offer some solace to the world's economies, but Leung said it was unlikely to be a quick remedy for Hong Kong and China's exporters.

"It takes time for these policies to make a real impact," he said. "When the US announced its first QE measures in 2009, it was not until the following year that economies and exports began to bounce back."

Hong Kong's exports rose 22.8 per cent year-on-year by value in 2010 after a drop of 12.6 per cent in 2009.

Nearly half of the 509 Asia- Pacific-based executives polled by the council said Hong Kong's lead in merchandise trade and professional services would shrink in the next five to 10 years as more production lines in the Pearl River Delta are relocated to inland China and to Southeast Asian countries. But they believed Hong Kong's competitive edge would grow in areas such as finance and intellectual property.

Leung said that despite the grim economic data, 77 per cent of respondents still said Hong Kong would be their first or second choice of location for a regional headquarters - ahead of Singapore and Shanghai, citing its advantages on marketing, sourcing and raising funds. It was also seen as the best gateway to the Asian market.