Price rises maintain value for HK exporters
Toy and electronics sectors manage to keep sales revenue positive despite the slowdown in trade.
18 March 2022
Exporters from Hong Kong are feeling the upsides and downsides of inflation, with the value of their products holding up at the same time as input costs expand and supply chain problems lead to shortages of raw materials.
Releasing the quarterly HKTDC Export Index on Thursday, the Hong Kong Trade Development Council reported that the Trade Value Index for the first quarter of 2022 remained in expansionary territory at 52.8, despite the reading dropping from 57.0 in the previous quarter.
“This robust outcome indicates that unit prices in most sectors will continue to rise in the near term, with the toy and electronics sectors leading the way at 56.7 and 53.5 respectively,” HKTDC Director of Research Irina Fan said.
Asia leads the way
Among export destinations for Hong Kong companies, Asia remained likely to be the top-performing market over the coming months, with the best performer being Japan (main picture) at 45.6, followed by Mainland China (42.1). On the other hand, the United States dropped 3.8 points to 39.1, an outcome seen as less than promising. Overall, exporters were pessimistic on major markets, with all the associated sub-indexes declining.
The broad HKTDC Export Index fell 12.5 points to 24.7. “The index shrinking for the third consecutive quarter can be taken as a clear indication that the prospects for short-term export growth are expected to weaken further,” Ms Fan said.
The survey found most respondents (93.1%) indicated business had been negatively affected by the COVID-19 pandemic over the past three months, a rise of 6.1 percentage points on the fourth quarter of 2021. Key negative impacts included rising transport costs (75.7%), ongoing disruptions to logistics and distribution arrangements (64.5%) and shortages in raw materials, parts and components (46.5%).
“In light of rising costs, the pricing response from companies has been notably mixed. While 46.8% of respondents indicated they had been able to pass on at least some of their increased costs to buyers, 48.1% maintained this had not been an option. In addition, about one third (34.2%) of respondents expected their profit margins to rise or stay at the same level, while 65.8% predicted their profit margins would fall year-on-year over the course of the next 12 months,” Ms Fan added.
The HKTDC conducts the Export Index survey every quarter, interviewing 500 local exporters from six major industries including machinery, electronics, jewellery, watches and clocks, toys and clothing, to gauge business confidence in near-term export prospects. The Index indicates an optimistic or pessimistic outlook, with 50 as the dividing line.
HKTDC Economist Samantha Yim said: “In line with the decline, exporter confidence continues to plunge across almost all industry sectors and major markets. Across many of the major sectors, exporters remained notably cautious. This saw timepieces emerge as the least positive sector at 19.7, while machinery recorded the largest drop, falling 19.1 points to 25.0. By contrast, the toy sector was the only one to merit an increased read, up 8.5 points to 33.5.”
Challenges and strategies
Looking ahead, an increased number of respondents were concerned about the impact of COVID-19 (53.5%) – a significant climb from the 32.5% of respondents reporting the same sentiment in the previous quarter. A further 11.4% indicated that prospects of a stuttering economic recovery remained among their key challenges, while 9.3% worried about the continued closure of borders.
In terms of business strategies for the year, 38.5% of respondents favoured developing other product lines, followed by diversifying into new overseas markets (29.9%) and developing online sales or sourcing channels (29.4%).
In December 2021, the HKTDC forecast that Hong Kong exports will grow by 8% in value in 2022.
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