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  • HKTDC Export Index Rises For Second Straight Quarter

    Published on June 16, 2015

    Hong Kong :  The Hong Kong Trade Development Council’s (HKTDC) Export Index for the second quarter of the year was up 1.9 Mekongpoints to 46.8, representing the second consecutive rise in the index. At today’s press conference, HKTDC Director of Research Nicholas Kwan said: “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.”

    Mr Kwan maintained his forecast of three per cent growth in the value of Hong Kong exports for 2015.

    There was no significant change in the export indices for Hong Kong’s major markets in the second quarter of 2015. The indices for Japan, the Chinese mainland and the US were all close to 50, indicating a more or less neutral exporter sentiment. The index for the EU edged higher for the third quarter in a row to 48.6, demonstrating stronger confidence in the region. Among industry sub-sectors, toys performed best, rebounding sharply from 39.4 in the previous quarter to 52.5. Electronics and timepieces continued to improve, but export sentiment for clothing and jewellery were quite negative, with their respective indices dipping below 40.

    Optimistic Mid-term Outlook

    Daniel Poon, Principal Economist (Global Research) of the HKTDC pointed out that, as global economic conditions improve, the mid-term sales outlook for various industries has become more optimistic. He provided analysis of the following industries:

    – Electronics: Electronics comprise 60 per cent of Hong Kong’s exports and are the engine for export growth. It is expected that export momentum will remain stable in the medium term. A survey conducted at the HKTDC Hong Kong Electronics Fair (Spring Edition) revealed that over half of the exhibitors (53 percent) expected sales to grow this year, while exhibitors and buyers continued to be bullish about the mainland market.

    – Toys: 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 as well as birth rates are growing. Product-wise, cartoon/animation licensed toys, educational toys and electronic games for youngsters will be the mainstay. Hong Kong toy manufacturers should pay attention to the safety, quality and design of products and explore new distribution channels, especially selling on e-platforms.

    – Clothing: As the economies of traditional markets stabilise and the middle-class consumer populations in the emerging markets continue to grow, the increasing demand for quality clothing offers opportunities for Hong Kong companies. In the medium term, Hong Kong’s exports of clothing should regain steam. As far as procurement and production are concerned, rising costs in the mainland have forced manufacturers to reform their supply chains in the mainland to minimise operational costs and raise competitiveness, or even to shift their production base to other regions. This trend will continue to redefine the landscape of global trade and logistics in clothing. In addition, clothing companies in traditional markets in Europe and North America now prefer to transfer some overseas manufacturing near-shore, to better manage stock and transportation. It is expected that overseas buyers will respond to this trend by adopting corresponding procurement strategies.

    – Timepiece: As consumers in traditional markets become more prudent and are putting more emphasis on value for money, there are better sales prospects for mid-range fashion watches. In the mainland, demand for Hong Kong’s mid- to-upmarket watches is still strong, while demand for luxury watches may be affected as a result of the Central Government’s anti-corruption campaign. Electronic gadgets such as smart watches are posing challenges to Hong Kong’s watch industry, which is now trying to meet market demand for watches as fashion accessories.

    – Jewellery: Traditional markets are generally optimistic about the sales outlook in the second half of this year and next year, whereas demand for jewellery is still strong in some emerging markets such as the UAE and the mainland. On the supply side, it is expected that, due to the effects of the monetary policies of major central banks around the world, precious metal prices will remain volatile in the medium term. In face of strong competition from their mainland, Indian and Thai counterparts, Hong Kong suppliers should boost their competitiveness by actively exploring new markets; making better use of other materials such as karat gold and gemstones; focusing on craftsmanship, product design and diversification; and offering higher quality services.

    Recovery Quickens

    Regarding global markets, Mr Poon said: “Within the developed economies, the US 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. 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, “Abenomics” continues to bring positive effects to the economy, while the proactive monetary easing policy is keeping the Japanese yen weak and driving exports. Nevertheless, the slow progress of its economic structural reforms may turn out to be a hindrance to Japan’s economic recovery.

    While urging Hong Kong companies to step up their sales efforts in traditional markets, Mr. Poon also highlighted business opportunities in emerging markets. “It is believed that China’s economy will trend towards a moderate growth. Though the Central Government has accepted that a lower economic growth is a 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 ties with the world economy.” In ASEAN, intraregional economic connections are becoming ever closer; foreign companies continue to invest while reforms in economic structure and increasing infrastructure investments are stimulating the economies. Mr Poon expects that the ASEAN economy is poised for rapid growth.

    The HKTDC’s Dickson Ho, Principal Economist (Asian and Emerging Markets), further pointed out that the “One Belt, One Road” initiative will drive economic co-operation between China and the Greater Mekong Sub-region (GMS*). With the “21st Century Maritime Silk Road” linking China and Southeast Asian countries and the Asian Infrastructure Investment Bank providing funds to less developed Asian countries, infrastructure construction in the GMS is looking up. In addition to the “One Belt, One Road” initiative, the quickening pace of industrialisation and urbanisation in the GMS countries will also promote the development of infrastructure and real estate sectors in these countries. Specifically, Mr Ho laid out the latest developments and opportunities in Vietnam and Thailand.

    He said, “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. Other than large cities such as Ho Chi Minh City and Hanoi, a number of rapidly urbanising and industrialising regions, such as Binh Duong Province in the south and Bac Ninh Province in the north, are drawing the attention of foreign investors.” Decent growth prospects for Vietnam’s infrastructure and real estate sectors will offer business opportunities to Hong Kong companies offering related services such as construction, engineering, planning and project management, Mr Ho added.

    In Thailand, around half of the population lives in the northern and north-east regions. From 2007 to 2012, economic growth in the north-eastern region was 25 per cent, appreciably higher than the 16 per cent growth in Bangkok and its peripheral areas. Mr Ho remarked that, as modern retailing in these emerging consumer markets has yet to be developed, their potential for growth surpasses that of Bangkok. Although it is worthwhile for Hong Kong companies to exploit opportunities in these inland retailing markets, the consumption pattern of residents in the inland regions is more conservative. Therefore, in pricing and selling, the mid- or mass-market should be the main target. Also, as Thailand is a major manufacturing country and close to many emerging production bases in ASEAN, there will be increased demand for more comprehensive integrated logistics services, which mean opportunities for Hong Kong logistics companies.

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