Standard Chartered Bank and the Hong Kong Trade Development Council (HKTDC) announced yesterday (14th) the "Standard Chartered Greater Bay Area Business Sentiment Index for the Third Quarter of 2024", which shows that the "expectation index" of business activities has risen for two consecutive quarters, from 54.8 in the second quarter to 55.2 in the third quarter, reflecting that market sentiment is continuing to improve slightly. Lau Kin Hang, Senior Economist of Standard Chartered Greater China, believes that with a series of measures launched by the central government to stimulate the economy, the performance of the relevant indices in the fourth quarter will be better than that in the third quarter.
According to the Standard Chartered Bank and the HKTDC Q3 2024 Standard Chartered Greater Bay Area Business Climate Index, Hong Kong's "Expectation Index" rose from 49.7 in the second quarter to 58.8 in the third quarter, outperforming the 11 cities in the Guangdong-Hong Kong-Macao Greater Bay Area.
As for whether the positive momentum will continue into the first two quarters of next year, Lau believes that it will depend on the implementation of policies and follow-up measures, including factors such as the real size of borrowing and the upper limit of the deficit ratio. However, in the Standard Chartered Greater Bay Area Business Climate Index for the third quarter of 2024, the current situation index, which reflects business activities, dropped from 54.1 in the second quarter to 50.6 in the third quarter, indicating that the economic momentum has weakened.
Source: HKTDC, Standard Chartered Research
Hong Kong's "expectation index" rose the highest in the Bay Area
In terms of city performance, Hong Kong's Expectation Index rose from 49.7 in the second quarter to 58.8 in the third quarter, outpacing the 11 cities in the Guangdong-Hong Kong-Macao Greater Bay Area. Hong Kong's Current Situation Index also edged up by 0.2 percentage points to 47.3. Liu Jianheng pointed out that this may be related to the start of the interest rate cut cycle for the Federal Reserve in the third quarter.
Although it is expected that Hong Kong's business environment is expected to improve, when asked whether the recent repeated rumors of store closures are contrary to the optimistic expectations reflected in the survey, Lau responded that the survey interviewed 200 Hong Kong enterprises does not rule out that the performance of retail and other industries will be relatively mixed, so even if individual Hong Kong shops close their businesses, it may not completely contradict the survey results.
Lau believes that Hong Kong has always been a small and open economy, and the central banks of the world's two largest economies (i.e. China and the United States) have taken action to "stabilise the economy" at almost the same time, and it is believed that Hong Kong's economy will also benefit from this. He also believes that the Policy Address to be delivered tomorrow by the HKSAR Government is an excellent opportunity to support the tourism, trade, financial and other industries by introducing measures, and hopes that Hong Kong enterprises will gain more business opportunities through the relevant measures.
Regarding the trend of interest rates, Liu Jianheng expects that the Fed will cut interest rates by another 0.25% in November, and may also cut interest rates by 0.5% in December, and will cut interest rates five more times next year, each time by 0.25%.
As for Hong Kong's prime rate (P), Lau expects that if the Fed cuts interest rates by 0.25% in November, Hong Kong banks may follow by 0.125%.
Businesses are concerned about the US-China trade war with the EU
It is worth noting that the market has been concerned about the further deterioration of Sino-US trade relations if Trump is re-elected United States as president. According to the survey results, as many as 60% of the surveyed companies believe that external and internal risks will pose significant challenges to their overall business in the next 12 months, with higher inflation and interest rates, another slowdown in the mainland's economic growth, and trade tariffs and sanctions on mainland-origin products being the top three risks that the respondents are concerned about.
During the investigation, news of additional import tariffs on products of Chinese origin heated up again. Regarding the impact of various trade barriers, 47.2 per cent of the respondents said that the increase in tariffs had a negative impact on them, 44.2 per cent said that sanctions had a negative impact, and 34.6 per cent said that non-tariff barriers had a negative impact.
Assuming that the trade dispute between China and United States or between China and the EU intensifies, 37% of respondents expect to change their foreign trade operations in the coming months, including the possibility of shipping export orders or imports in the second half of the year in advance to reduce the potential impact of the trade dispute on their business. However, FAN Yuen-yi, Director of Research at the HKTDC, believes that the US-China trade war has never stopped since its inception, and that many companies in the Guangdong-Hong Kong-Macao Greater Bay Area have already shifted their markets to emerging markets, so they are well prepared for possible geopolitical changes.
DBS: SMEs are looking for support in three areas
According to a recent survey released by DBS Bank (Hong Kong) yesterday, Hong Kong's SMEs expect the upcoming 2024 Policy Address to provide support in three areas, including branding, technology development and financial support.
In September this year, DBS Hong Kong conducted a survey titled "Asia's Growth, Expansion and Challenges Outlook and Expectations for the 2024 Hong Kong Policy Address", which interviewed 200 business owners and decision-makers in Hong Kong and other cities in the Greater Bay Area. The survey aims to understand the expansion plans and opportunities of SMEs in the Asian market and their outlook for the latest Policy Address.
According to the survey results, 40% of local respondents hope that the Hong Kong government will give priority to brand promotion. 39% of the respondents hoped that the Hong Kong government would provide support for technology development, including the provision of professional knowledge and relevant consultation channels. 35% of the respondents expect the Hong Kong government to help address their fiscal and funding needs; In addition, 34% of the respondents wanted to provide business matching and networking opportunities, highlighting the importance of collaboration for long-term success.
Among them, 86% of the SMEs surveyed in Hong Kong and 89% of respondents in other cities in the Greater Bay Area are actively planning or are expanding into the Asian market. In terms of target markets, 30% of respondents from other GBA cities prefer Hong Kong as their preferred base for business expansion, followed by Singapore (22%). For Hong Kong SMEs, 34% chose to explore GBA cities, while non-GBA mainland cities (23%) and Singapore (20%) were also favoured by SMEs.
Source: Xinhuanet
In terms of decision-making factors driving business expansion, SMEs in Hong Kong and other GBA cities see the opportunities offered by the Asian market as supply chain advantages, reduced operating costs and access to a large consumer base in new target markets.
Small and medium-sized enterprises (SMEs) face many environmental challenges
Yue Wang, Executive Director and Head of SME Banking, DBS Hong Kong, said a robust policy framework is essential for SMEs to cope with the current market challenges. The survey results highlight the resilience and ambition of SMEs, and the priority direction for SMEs is to expand their business in Asia.
While SMEs are looking to expand their business, the survey also pointed out that there are many environmental challenges at present. Legal, tax and compliance issues were the top concerns for the respondents in both places, with 42% of respondents in other GBA cities and 38% of local respondents respectively citing them as their main concerns. In addition, cultural differences, language and unfamiliarity with new markets are also seen as major obstacles.
Source: Hong Kong Commercial Daily
Reporter: Kwong Weixuan, Han Shang
Editor: Saichi
Cover: Yang Liang
Proofreading: Jin Xia
Review: Oriole
Executive Producer: Yushan