Standard Chartered Hong Kong SME Leading Business Index for 4th Quarter Rises Slightly to 46.3 Overall Business Sentiment Remains Pessimistic

 

The Hong Kong Productivity Council (HKPC) today (17 October 2012) released the latest findings of the “Standard Chartered Hong Kong SME Leading Business Index” (Standard Chartered SME Index), reporting an Overall Index at 46.3 for the fourth quarter of 2012. The business sentiment of local small and medium enterprises (SMEs) remains pessimistic, with the reading below the 50 no-change mark; despite the modest improvement from 42.9 in the last quarter. As SMEs expect further rise in material costs, they are advised to adopt automation and information technology, such as cloud-based solutions, to effectively monitor and control cost. 
 
Conducted independently by HKPC and sponsored by Standard Chartered Bank (Hong Kong) Limited (Standard Chartered Hong Kong), the quarterly index survey enables the public and SMEs to get an insight into the forthcoming business climate for better forward planning. The Overall Index comprises five areas, including local SMEs’ outlook on their ‘sales amount’, ‘profit margin’, ‘investments’, ‘staff number’, and ‘global economic growth’ for the next quarter. In the current survey, telephone interviews with 806 SMEs in eight industry sectors were conducted in September 2012.
 
Among the five surveyed areas, the Sub-Indices for ‘staff number’ and ‘investments’ scored slightly above 50, indicating SMEs interviewed are still willing to allocate resources in these two areas. These investments are mainly for use in expanding production capacity, increasing raw materials inventory, and the purchase of equipment and facilities. No respondent has plans to invest in automation. While the Sub-Indices for ‘sales amount’, ‘profit margin’, and ‘global economic growth’ were below 50 (indication of pessimism), the readings have risen significantly from last quarter’s.
 
In terms of industry sectors, the Retail Industry Sub-Index posted 46.2, up 23.5% against the last survey, the highest increase of all surveyed sectors. It reflects a marked improvement on the economic outlook for the retail sector. The Sub-Indices for Import/Export/Wholesale Industry and Manufacturing Industry remained almost the same, scoring 45.6 and 41.8 respectively.
 
Commenting on the findings, Mr Leo Lam, Director (Business Innovation) of HKPC, said, “The business confidence among local SMEs remains weak in the fourth quarter, despite signs of improvement, especially in the retail sector. Respondents in this sector expect that the sales performance and profit margin will improve with the Christmas and year-end shopping season around the corner. Nevertheless, over 70% of retailers interviewed expect that the amount of sales generated from Mainland visitors through the “Individual Visit Scheme” will be less than 10%. SME retailers are advised to expand their sales network to attract more customers both locally and from abroad so as to minimize the impact of the shrink in spending by Mainland visitors.”
 
Mr Kelvin Lau, Senior Economist of Standard Chartered Hong Kong, said, “The domestic demand in Hong Kong remains steady after the adjustment in Q3, especially benefitting from the low unemployment rate and the wealth effect brought about by the property market, leading to a significant rebound of the Retail Industry Sub-Index this quarter.” Three out of the five Sub-Indices still read below 50, indicating that SMEs still hold pessimistic sentiment on the overall business performance and global economy in Q4. “This is in line with our outlook that global growth trajectory is now at an inflexion point. Despite little macroeconomic signs of green shoots for now, we see the recent consolidation is building a base for a gradual recovery in 2013, possibly led by Asia – and the latest rebound in the Global Economic Growth Sub-Index from extreme low levels, for one, echoed this view,” Mr Lau added.
 
The respondents were also surveyed about their company cost structure. Results showed that the three major cost components, namely raw materials, employee salaries, and rent account for 67% of the total costs. In particular, rent accounts for 24% of the total cost of SME retailers interviewed, which is higher than those of the Import/Export/Wholesale Industry (20%) and Manufacturing Industry (16%). For raw materials, though 53.7% of respondents expected the cost to rise in the fourth quarter, the reading has dropped by 21.6% from the last survey’s. Moreover, the majority of SMEs interviewed anticipated that the employee salary, rent and financing cost will remain unchanged.
 
Mr Lam added, “The findings show that local SMEs interviewed are relatively confident in controlling material costs in the fourth quarter. As fluctuations in material costs are subject to various external factors, SMEs should turn to other measures, such as automation and information technology systems, for more effective cost monitoring and control. These technologies are applicable to both manufacturing and service sectors. For instance, service industry SMEs can computerize some of their services to improve operational efficiency. They can also adopt cloud computing solutions to lower the operational cost. To facilitate SMEs in the retail, wholesale and distribution services in selecting appropriate cloud-based solutions, HKPC will compile a cloud solution guidebook and organize a series of training to promote a wider adoption of these technologies.”
 
To download the report of the “Standard Chartered Hong Kong SME Leading Business Index”, please visit the website: www.smeone.org. Results of the next survey on the business sentiment for the first quarter of next year will be released in January 2013.
 
For more details about the Index, please contact HKPC’s Gary Cheng at tel. (852) 2788 6178 or email: garyc@hkpc.org. For other media enquiries, please contact Justina Shum at tel. (852) 2788 5895 or email: justina@hkpc.org. 
 
 
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Mr Jonathan Ho
General Manager
Corporate Communications
Tel: (852) 2788 6390
Fax: (852) 2788 5056
Email: jonathanho@hkpc.org
Website: www.hkpc.org
 
17 October 2012
 
(From left to right): Mr Gary Cheng, Senior Consultant of HKPC; Mr Leo Lam, Director (Business Innovation) of HKPC; and Mr Kelvin Lau, Senior Economist of Standard Chartered Hong Kong, announce the survey findings of the “Standard Chartered Hong Kong SME Leading Business Index” for the fourth quarter of 2012
(From left to right): Mr Gary Cheng, Senior Consultant of HKPC; Mr Leo Lam, Director (Business Innovation) of HKPC; and Mr Kelvin Lau, Senior Economist of Standard Chartered Hong Kong, announce the survey findings of the “Standard Chartered Hong Kong SME Leading Business Index” for the fourth quarter of 2012
 

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