Hong Kong's trade confidence has plunged to lows not seen since the global financial crisis that began in 2008 as fears of another slowdown start to hit home.
An HSBC survey of 6,344 exporters, importers and traders in about 20 markets in July showed that the confidence of Hong Kong firms was at 95. A number above 100 indicates optimism.
The survey began in June 2009 at the height of the last crisis. The confidence level among Hong Kong traders at the time was recorded as 93.
This year, Hong Kong entrepreneurs were the most pessimistic of the eight Asia-Pacific markets surveyed, with mainland China, Australia, Singapore, Vietnam, India, Indonesia and Malaysia all recording positive readings above 100.
Albert Chan Leung-choi, HSBC head of commercial banking, said yesterday that confidence had been hurt by a continuous flow of bad news from abroad.
Small and medium-sized enterprises 'have bigger challenges in the third quarter of this year', he said. 'Overseas markets are shrinking, consumer demand has weakened in Europe and the United States and orders are lower.'
Mainland SMEs fared a little better, with confidence falling from 114 in the first-half of this year to 100. The confidence of entrepreneurs in Hong Kong and mainland China fell below the Asia-Pacific average of 112.
Chan said Chinese SMEs were plagued by more troubles such as a credit crunch and inflation in production costs, wages and rents.
'The mainland's tightened credit control is aimed at cooling property prices, but unfortunately this dries up the credit supply for SMEs,' he said. 'Some of our clients chose to keep cash in their pockets and put capital expenditure at their factories on hold.'
Chan said there was an increase in mainland firms borrowing from banks in Hong Kong, but he did not elaborate.
Despite the slowdown, Terence Chiu Man-chung, HSBC head of trade and supply chain for Hong Kong and Macau, said the mainland was destined to overtake the US and become the world's largest trading nation by 2025.
In its first quarterly report on corporate trade forecasts, the bank said the mainland's trade with the world would grow 7.9 per cent annually for the next five years, or four times faster than the global rate of 2 per cent.
Chan said the forecast was based on the mainland's policy of spurring domestic consumption, which would likely see an increase in imports ranging from raw materials and commodities to luxury goods.
HSBC also forecast China trade will account for 13 per cent of the world's total by 2025 against 9.9 per cent last year. The market share of the US will be 9.1 per cent by that date, down from 11.2 per cent last year.
HSBC's forecast followed research from Citigroup Global Markets in June that tipped China to be the largest trading nation as soon as 2015.