Export Sentiment Boost
Global trade looks set to pick up in the second half of the year, based on the latest HKTDC study.
17 June 2015
After a slow start to the year, the economic momentum is gathering pace around the world, according to new findings by the Hong Kong Trade Development Council (HKTDC).
“Although global economic growth has been sluggish in the first half of 2015, market conditions indicate that the external environment will improve in the second half of the year,” said Nicholas Kwan, HKTDC Director of Research.
Among mature markets, the United States is expected to be “the leader of the pack, with its growth momentum buttressed by lower unemployment, steady wage growth, improvements in the real estate market, shrinking household debt and strengthening consumer confidence,” said Daniel Poon, HKTDC Principal Economist (Global Research). “In the EU, with the launch of a large-scale bond-buying scheme and the European investment plan to promote economic growth, the pace of recovery should pick up in the second half of this year and the next year.”
In Japan, Mr Poon said “Abenomics” continues to bring positive effects to the economy, while the proactive monetary easing policy is driving exports and keeping the Japanese yen weak. Nevertheless, the slow progress of its economic structural reforms may hinder Japan’s recovery.
While urging Hong Kong companies to step up their sales efforts in traditional markets, Mr Poon also highlighted business opportunities in emerging markets, including the Chinese mainland, which is expected to enjoy moderate growth. “While the Central Government has accepted that a lower economic growth is the new normal, it is still expected to roll out stimulus measures to maintain the vitality of the economy. The increase of free trade zones and the “One Belt, One Road” national strategic initiative will drive upgrading and development of the economy and tighten China’s links with the world economy.”
Growing integration in the ASEAN economies is also attracting foreign investment, which along with economic reforms and increased infrastructure investment, is stimulating Southeast Asian economies. Mr Poon said that the ASEAN economy is poised for rapid growth.
|The HKTDC Export Index for the second quarter of the year was up 1.9 points to 46.8, representing the second consecutive rise in the index. |
There was no significant change in export sentiment for Hong Kong’s major markets during that period, with the indices for Japan, the Chinese mainland and the US registering close to 50, indicating a more or less neutral exporter sentiment. The index for the European Union strengthened for the third quarter in a row to 48.6.
Among industry sub-sectors, toys performed best, rebounding sharply from 39.4 in the previous quarter to 52.5. In contrast to the more or less saturated traditional markets, sales prospects for the emerging markets are markedly better, particularly in the mainland, India and the ASEAN countries, where the middle class population and birth rates are growing.
Electronics, a growth driver for Hong Kong exports, and timepieces continued to improve, at 46.8 and 45.1 points respectively. Better sales prospects are expected for mid-range fashion watches in traditional markets, where consumers look for more value for money timepieces.
But export sentiment for clothing and jewellery were quite negative, with their respective indices dipping below 40. Traditional markets are generally optimistic about the jewellery sales outlook in the second half of this year and next year, with demand remaining strong in some emerging markets such as the UAE and the mainland.
Greater Mekong Sub-region
According to Dickson Ho, Principal Economist (Asian and Emerging Markets), the “One Belt, One Road” initiative will promote economic cooperation between China and the Greater Mekong Sub-region (GMS), which comprises six countries and the mainland regions along the Mekong River basin: Cambodia, Laos, Myanmar, Thailand, Vietnam, as well as the Chinese mainland provinces of Guangxi and Yunnan.
Infrastructure development in the GMS is expected to surge, thanks to the “21st Century Maritime Silk Road,” linking China and Southeast Asian countries and the soon-to-be established Asian Infrastructure Investment Bank.
In addition to the “One Belt, One Road” initiative, the faster pace of industrialisation and urbanisation in the GMS countries will also promote the development of infrastructure and real estate sectors in these countries, including Vietnam and Thailand.
“Vietnam is a relatively low-cost production base and foreign manufacturers have strong demand for its industrial properties such as industrial parks, warehouses, as well as facilities in logistics and public utilities,” said Mr Ho. “Other than large cities such as Ho Chi Minh City and Hanoi, a number of rapidly urbanising and industrialising regions such as Bình Dương Province in the south and Bắc Ninh Province in the north are drawing the attention of developers.”
Mr Ho said that growth in Vietnam’s infrastructure and real estate sectors will open business opportunities for Hong Kong companies offering related services, including construction, engineering, planning and project management.
Retail market prospects in Thailand’s northern and northeast regions are also favourable compared to the capital Bangkok, which only saw 16 per cent growth from 2007 to 2012, in contrast to 25 per cent the growth in the north and northeast.
Mr Ho said that as modern retailing in these inland consumer markets has yet to develop, their potential for growth surpasses that of Bangkok. Hong Kong companies should target the mid- or mass market as the consumption pattern of residents there is more conservative.
As a major manufacturing country close to emerging production bases in ASEAN, Thailand will see increased demand for cross-border logistic services. Trading modes and industrial development in these regions are expected to grow more complex, sparking strong demand for more comprehensive integrated logistics services, which Hong Kong logistics companies can offer.
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