Hong Kong exporters' confidence rebounded the most in a year this quarter, although it remained slightly below the threshold that indicates expansion.
Their optimism was fuelled by improved exports, although jewellery exporters remained gloomy in light of a clampdown on the lavish lifestyle of mainland bureaucrats.
Local manufacturers and service providers' confidence jumped to a 21-month high of 49.5 from 31.6 in November, a survey of 510 exporters last month by the Hong Kong Trade Development Council shows.
Edward Leung, the council's director of research, who forecasts 4 per cent growth in the value of Hong Kong's exports this year, said stable recovery in the United States and mainland China economies was the main cause of the rebound.
However, he said proposals by the Cypriot government to levy a tax on bank deposits had renewed worries about Europe's financial stability.
"The euro-zone currency crisis will always come back. I don't think it can be fully resolved in the next one or two years," Leung said.
"But exporters have reasons to be optimistic, as the foundation of the US economic recovery is quite sound, and the pace of urbanisation in China is quick."
Chong Shing-hum, president of the Hong Kong Chinese Importers and Exporters Association, said local exporters reported a year-on-year increase of 3-4 per cent in invoices in the past three months. Manufacturers of gadgets, electronics and car parts had even bigger increases.
That explained why the confidence level of exporters of electronics, machinery and toys went above 50 - the threshold that indicates expansion.
Jewellery, however, was the only sector where exporters' confidence fell. Leung said that was mainly due to the warning of Premier Li Keqiang that officials should "abandon any expectation of getting rich".
Meanwhile, more than a quarter of the respondents said the labour shortage was more severe or much more severe than last year. They were mostly garment and apparel manufacturers who are unable to carry out their entire production process using machinery.
The high value-added sectors of electronics and technology products, which have resorted to automation in the past few years, were less affected.