Confidence rising among Hong Kong's small and medium-sized firms

PUBLISHED : Wednesday, 23 July, 2014, 1:33am
UPDATED : Wednesday, 23 July, 2014, 1:33am

Confidence among Hong Kong's small and medium-sized enterprises is improving but investment sentiment has fallen for two consecutive quarters, a new survey for the Hong Kong Productivity Council shows.

The Standard Chartered SME Index has edged up 0.5 point to 51.3 in the outlook for the third quarter, the third successive quarter it has been above 50. A reading above 50 indicates a positive outlook.

SMEs’ worries over the global economy are fading

The global economy sub-index, which tracks SMEs' outlook on the world, jumped four points to a record high of 46.9.

The survey, sponsored by Standard Chartered Hong Kong, interviewed more than 800 local SMEs in June.

Although the business outlook has improved, the investment sentiment turned more cautious. The investment sub-index fell 3.5 points to 53.1 for the third quarter.

Investment sentiment in all three major sectors - manufacturing, export-import and wholesale, and retail - declined. Only 13 per cent of the manufacturers interviewed said they plan to increase investments, a significant drop from 21 per cent in the last quarter.

Gordon Lo, director of the Hong Kong Productivity Council, said: "SMEs' worries over the global economy are fading but the falling investment confidence, especially in manufacturing, retail, food and accommodation sectors, is noteworthy."

He added that the ratio of rental expenses to operating costs has increased from 23 per cent to 32 per cent over the past two years. The survey finds that rents are the biggest concern for SMEs, with nearly a third of the respondents saying they are looking for support as rental pressure increases.

"With rising costs, SMEs should make use of information and communication technology as well as other technologies to enhance operation and cost efficiency," said Lo (pictured).

The yuan's depreciation in the first half alleviated some cost pressures on SMEs that import raw materials from the mainland.

The survey also shows about 40 per cent of respondents thought imposing a cap on the number of mainland visitors allowed would hurt Hong Kong's business environment, with around 58 per cent of the respondents from the food and accommodation sector saying the proposed cap is a bad idea.