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HKTDC Quarterly Export Confidence Index Shows Slight Rebound
Export Index Reflects Business Problems and Opportunities for Hong Kong Companies

18 March 2009 – Export confidence has shown signs of stabilisation despite the continuing global economic downturn. The latest HKTDC Export Index, published by the Hong Kong Trade Development Council (HKTDC), saw some improvement after four consecutive quarters of decline. "Although export confidence in the first quarter improved slightly, the general economic outlook remains difficult," said HKTDC Chief Economist Edward Leung. "Hong Kong enterprises should make extra efforts to identify new markets and opportunities in a few niche sectors."

The Export Confidence Index, published in the latest issue of the HKTDC Trade Quarterly, stood at 25.8 in the first quarter of this year, compared with 22.3 in the fourth quarter of 2008. This signals a slowdown in the export contraction rate.

The HKTDC Export Index, released quarterly since December 2006, monitors the export performance of major industries in Hong Kong. Despite the slight rebound in sentiment, confidence remains fragile, with pessimists outnumbering optimists. The main reason cited was weak buyer demand. All industries, however, showed a rebound in confidence. The index for timepieces saw the biggest rise, jumping 11 points, to 28.5. Jewellery exporters, however, remained pessimistic, with the jewellery index recording the lowest industry rating, despite a rise of 6.5 points to 19.

Export confidence improved in all major markets, with the Chinese mainland, at 45.5, continuing to lead the pack. "Hong Kong exporters are actively developing new markets. Fourteen per cent of companies surveyed reported new buyers from emerging markets in the past six months. They came not only from Asia, but as far afield as Latin America and Africa," Mr Leung said.

Operating Problems
In the first quarter of this year, the HKTDC polled 500 Hong Kong companies that source, produce and sell, to gauge operating difficulties facing these companies. Among them, 68 per cent said that the high renminbi exchange rate was a serious operating problem; 66 per cent attributed problems to price reduction pressures. Other problems cited included keen market competition (64 per cent), fluctuations in the price of raw materials (64 per cent) and weak export demand (61 per cent).

Among the various relief measures unveiled, most respondents said that a reduction in local administrative fees, which directly cuts costs, was the most welcome. They also believed that the relaxation of processing trade policies was helpful. These include simplifying procedures for conversion of processing trade into "foreign-invested" operations and substantially reducing the types of "restricted" products under processing trade. As for policies, more than 90 per cent said a stable or lower renminbi exchange rate would help boost exports. Some 80 per cent want changes to the labour contract law and a reduction in company social insurance premium rates.

Opportunities Amid Adversity
"Price will be a mighty weapon for those bent on getting through difficult times," Mr Leung noted. "Charging less may be the only way to stay in business. Consumers worldwide, in developed and developing markets, are likely to be interested in tangible, value-for-money options."

The latest issue of Trade Quarterly also looks into sectors where demand remains strong despite challenging market conditions. "Less obvious niche markets with potential still exist, despite this unpredictable recession," Mr Leung said. He suggested that some industries might be less affected by the economic downturn, including healthcare, which is seen as a "recession beater." Aging baby boomers need surgical and medical supplies that Hong Kong traders can provide.

The video games industry, another niche market with potential, is also profiled in the new Trade Quarterly. Games offer cheap entertainment for younger consumers, and the mainland provides a huge, and barely tapped, electronics games market. Manufacturers at recent toy fairs indicated that parents were still willing to pay for toys.

Opportunities also exist in the growing environmental industry. Green energy and sustainability issues are the focus of the US government's nearly US$900 billion stimulus package. It is also high on the agenda of the mainland's own US$586 billion spending plan, with environmental-related projects worth almost a third of its stimulus package.

Media enquiries
Please contact the HKTDC's Corporate Communication Department:

Victor George Paddy       Tel: (852) 2584 4517     Email: victor.paddy@hktdc.org

About the HKTDC
Established in 1966, the Hong Kong Trade Development Council (HKTDC) is the international marketing arm for Hong Kong-based traders, manufacturers and service providers. With more than 40 offices worldwide, including 11 in the Chinese mainland, the HKTDC promotes Hong Kong as a platform for doing business with China and Asia. The HKTDC also organises trade fairs and business missions to connect companies with opportunities in Hong Kong and the mainland, while providing information via trade publications, research reports and online. For more information, www.hktdc.com

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