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HKTDC Raises Hong Kong Export Forecast to 12 Per Cent
Demand, Sentiment Boost Export Index for a Third Successive Quarter

17 June 2010 – Hong Kong exports rebounded in the first quarter of 2010, led by the faster-than-expected recovery in demand for electronics products, as well as brighter consumer sentiment and a rebuilding of inventory, according to new research by the Hong Kong Trade Development Council (HKTDC).

The better-than-expected results for January to April have prompted the HKTDC to raise its forecast for Hong Kong export growth to 12 per cent from an original five per cent. Edward Leung, Chief Economist of the HKTDC, said the revision is based on evidence that orders will be filled and that intra-regional trade will recover at rapid pace.

Speaking at a media conference today, Mr Leung also announced that Hong Kong’s Export Index climbed to 59.1 in the second quarter of 2010.

“The Index shows that Hong Kong exports have seen a commendable rebound, boosted by a faster-than-expected recovery in demand for electronics products alongside strong intra-regional trade.”

But Mr Leung said the pace of expansion of Hong Kong exports is expected to moderate over the coming months due to slower world-trade growth, stemming from an anticipated gradual unwinding of stimulus packages and increasing efforts by governments to enhance fiscal balances.

Third Successive Expansion
The Index has remained in expansionary territory for a third successive quarter, signaling sustained expansion in exports over the short-term, according to indices published in the latest issue of the HKTDC’s Trade Quarterly.

A reading above 50 indicates optimism among respondents, and most of the optimists surveyed said they saw strong demand from overseas buyers.

Among major manufacturing and trading industries, electronics and toys exporters were recorded as being the most optimistic, with export indices of 61 and 58.6 respectively. The figures show particularly strong signs of recovery in global electronics. The release of demand built up during recession and the successive release of new models have led to a boom in electronics exports.

Among major markets, all indices edged up from the previous quarter and held above 50. The Export Index for the Chinese mainland was 56.8, the highest reading for the mainland in three years.

Asia Trade Buoys Export Growth
The HKTDC research shows that mainland and Asia intra-regional trade were the main engines of Hong Kong’s export growth. In the first four months, total Hong Kong exports to the Chinese mainland rose 35.8 percent over the same period last year. Conspicuous consumption was also apparent, and surging exports whetted the appetite for industrial inputs. Sales of parts and components may have exaggerated the growth of Hong Kong exports, as such trade is dominated by semi-manufactures that might have crossed borders several times.

Within ASEAN, Vietnam and Indonesia are expected to stay on a fast-track to recovery. Outside ASEAN, India is the major pillar of growth. Across the region, unabated economic recovery should ignite stronger consumption, while firmer export growth in the region could mean a healthier appetite for capital goods and manufacturing inputs.

Among major developed economies, the export figures for January to April in the United States showed modest growth of 5.5 percent. The increase reflected huge monetary and fiscal support which, combined with various government initiatives, is leading to financial stability and asset price rallies. In light of high joblessness and sluggish property values, however, consumers are expected to remain conservative.

Challenges Ahead
Across the Atlantic, European Union consumers are likely to remain conservative due to fiscal tightening and a weak euro. Rising worry over sovereign debts and persistent scepticism about concerted financial support from the Eurozone members could derail nascent economic recovery in the EU and, in turn, affect other areas of the world.

Hong Kong companies also face soaring production costs. Rising material prices aside, labour shortages in the Pearl River Delta present the biggest challenge to Hong Kong manufacturers. Although research indicates that the situation has improved, employers are being forced to raise wages to recruit and retain workers, and higher wages are expected to remain a trend over the medium term.

Another threat to the medium-term outlook is mounting protectionism, especially from the US, which is hardening its stance towards the mainland. Currency issues are expected to play a more visible role over the medium term. If the Chinese currency appreciates against the US dollar, it would blunt the price-competitiveness of Hong Kong products.

The impact of such changes would be larger than in the past, given the rise in local content for Hong Kong companies producing on the mainland. Figures indicate that a one per cent appreciation of the renminbi would roughly translate to a 0.5 per cent increase in production costs against the previous 0.3 per cent.

“Hong Kong companies are confronted with risks and challenges incited by soaring production costs and renminbi appreciation,” said Mr Leung. “These factors will blunt the price competitiveness of Hong Kong products. Given the modest appetite in traditional markets, Hong Kong exporters are advised to look for emerging markets around the globe for sales expansion.”

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

Joe Kainz
Tel: (852) 2584 4216
Email: joe.kainz@hktdc.org

About the HKTDC
A statutory body 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 global offices, including 11 on the Chinese mainland, the HKTDC promotes Hong Kong as a platform for doing business with China and throughout Asia. The HKTDC also organises trade fairs and business missions to connect companies with opportunities in Hong Kong and on the mainland, while providing information via trade publications, research reports and online. For more information, please visit: www.hktdc.com.




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