The Hong Kong Trade Development Council (HKTDC) Export Index increased a further 1.9 points to 32.8 in the third quarter this year, indicating a sustained improvement in confidence in the short-term export performance. However, exporters face downward pressure on prices, with the Trade Value Index falling 11.5 points to 40.2.
HKTDC Director of Research Irina Fan told a press conference on Monday (19 September) that a deteriorating external environment was keeping the recovery slower than hoped. “Weakening demand in major markets dampened by high inflation and aggressive monetary tightening, coupled with rising Sino-United States trade tensions and other fallouts from the Russia-Ukraine conflict, also cloud the export outlook,” she said.
The HKTDC conducts the Export Index survey every quarter, interviewing about 500 Hong Kong exporters from six major industries – 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.
Shift in focus
Ms Fan said more than half the respondents (52.0%) in the latest exporters’ survey viewed the shortened quarantine requirement in the Mainland China – a seven-day centralised stay plus three days of home confinement – as positive for business. She said enabling more flexible business travel arrangements (53.8%), the gradual resumption of cross-border commerce and trade (33.0%), and smoother production flow (31.8%) were cited as the top benefits.
Impacts of the pandemic continue to decline but COVID-19-related issues remain among the top concerns for Hong Kong exporters over the next three months. Most respondents said COVID-19 persistence (40.2%) and border closure (22.6%) are the major impediments to export performance.
“To help them deal with this changing environment, Hong Kong businesses are tending to shift from being market-focused to more money-focused,” Ms Fan said. Developing other product categories (36.9%) and stabilising finances to ensure sufficient cash flow (35.6%) are the most popular business strategies adopted by the survey respondents. Additionally, more of them said they intend to increase unit prices (35.2%, up 18 percentage points).
Jewellery, Japan outperform
HKTDC Economist Corey To said jewellery was the most promising sector with the highest sub-index at 44.2, followed by toys at 37.0. The jewellery sector also showed the largest improvement, with a 9.9-point increase from the previous quarter, while the electronics sector gained 2.3 points to 32.7.
Mr To said Asia continues to provide a relatively promising outlook, adding that Japan remains the best performer at 48.4 (up 0.8 points), followed by the Association of Southeast Asian Nations (ASEAN) bloc (46.9, up 3.6 points) and Mainland China (45.8, up 2.7 points).
Recovering supply chains
He said the pandemic impact on businesses tended to be less severe in the third quarter as compared with April to June. “Fewer respondents experienced negative impacts on their business resulting from the pandemic (77.9%, down 1.2 percentage points). Among them, those whose business had been very negatively affected fell 11.8 percentage points to 23.4%.”
Mr To said rising transport costs (64.1%) and logistics disruptions (51.8%) remained the key challenges for Hong Kong exporters, though both fell significantly – by 8.5 and 13.4 percentage points respectively – from the previous quarter, reflecting the gradual easing of supply chain issues. “But it is worth noting that more respondents reported communications issues with overseas buyers/suppliers (48.2%, up 26.6 percentage points) and order cancellations (21.2%, up 4.5 percentage points).”