Hong Kong export confidence continues to shrink as the HKTDC Export Index fell by 12.5 points to 24.7 in the first quarter of this year, said the Hong Kong Trade Development Council (HKTDC) recently.
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 noted.
The index shrinking for the third consecutive quarter can be taken as a clear indication that the prospects for short-term Hong Kong export growth are expected to weaken further,” said HKTDC Director of Research Irina Fan.
However, the Trade Value Index painted a more optimistic picture, as it remained in expansionary territory at 52.8, despite its reading having dropped from 57.0 in the previous quarter, HKTDC noted.
“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,” Fan said.
The survey found that, unsurprisingly, a majority (93.1%) of respondents indicated that their businesses had been negatively affected by the COVID-19 pandemic over the past three months, a rise of 6.1 percentage points on the previous quarter.
Among the key negative impacts cited were rising transportation costs (75.7%), ongoing disruptions to logistics and distribution arrangements (64.5%) and shortages in raw materials, parts and components (46.5%), survey results indicate.
In light of rising costs, the pricing response from companies has been notably mixed, according to HKTDC.
- 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.
- About one third (34.2%) of respondents expected their profit margins to rise or stay at the same level, while 65.8% predicted their profits margins would fall year-on-year over the course of the next 12 months.
- 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
- Exporters were similarly pessimistic when it came to the near-term prospect of Hong Kong’s major markets, with all the associated sub-indexes declining.
- Overall, Asia continued to be seen as likely to be the best performer over the coming months, with the best performer being Japan at 45.6, followed by Mainland China (42.1).
- The US dropped 3.8 points to 39.1, an outcome seen as less than promising.
Challenges and strategies in 2022
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, HKTDC observed.
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, the organisation said.
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%), HKTDC added.