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Sean Kennedy

BUSINESS confidence in Hong Kong is at a low ebb, hard hit by falling property and share prices, according to a survey of more than 400 firms involved in financial services, manufacturing, real estate and retailing.

  The quarterly survey by Knight-Ridder Financial News asked firms about business prospects in the first quarter next year.

  It found a full 38 per cent of property respondents saw prospects as poor, and only eight per cent saw the outlook as good.

  The survey contrasts with a six-monthly poll sponsored by MasterCard International showing Hong Kong consumers were more confident about the stock market and employment than six months ago.

  However, Hong Kong consumers shared the concerns of those firms polled by the Knight-Ridder survey expressing reservations about inflation.

  Of the 400-odd businesses polled many cited the cost of doing business, including higher operating costs and wages as concerns for the next quarter.

  While rising interest rates left no one unscathed, the worst hit were the property and financial sectors, the survey said.

  Property prices were falling, and the higher cost of money meant demand was likely to spill over into the first quarter at least, it said.

  Among property respondents, 21 per cent saw prime office rents falling in the next quarter, down from zero in the last survey, and only 14 per cent saw prime office rents rising, from 33 per cent previously.

  The most confident of those polled were manufacturers. Some 63 per cent saw business prospects as good, and 12 per cent as very good.

  On the question of doing business post-1997, 87 per cent of manufacturers were not worried about operating in Hong Kong after 1997, 100 per cent of the finance sector respondents said they were not worried.

  It found that 86 per cent of retailers were unconcerned and 91 per cent of property sector respondents said they were not worried.

  Most brokers polled thought stock prices would stay in a trough as long as the US Federal Reserve Board looked like raising rates again.

  The finance sector expressed reservations about the cost of higher wages and operating costs, although the survey said general prospects ranged from steady to good among most respondents.

  It said that depending on the type of financial services offered, many firms were still having difficulties finding qualified help, with 82 per cent facing worker shortages and rising operating costs and 73 per cent predicting sharp wage increases.

  Every retail company polled was facing high rent and operating costs with wages cited as a problem by 71 per cent of respondents.

  Many have had to renegotiate leases at significantly higher rates, although retailers with large market shares were the most upbeat about the future, the survey said.

  One food retailer said spiralling wages, rental and operating costs were 'a great concern'.

      Hongkong Bank senior economist George Leung said the bank held similar views to some of those polled, and predicted that the first quarter would bring consolidation in the property and share markets.

  But he predicted that the economy would benefit from the airport project as early as the first quarter next year.

  Improved trade with the US and Japan would also buoy the economy.

  On inflation, he said the bank was tipping a slightly higher consumer price index for 1995, and China's food price inflation would also take a toll on the territory.

  One fast food restaurant chain, Cafe de Coral, last week reported sharply lower interim profit attributable to shareholders of $56.51 million, from $78.68 million in the corresponding period last year.

  The lower profits came despite a 15 per cent rise in turnover and the company promised it would cutting costs by shrinking branches, closing unprofitable outlets and renegotiating leases.



Business confidence sagging, says survey