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Standard Chartered SME Index up 0.7 Profit Margin and Global Economy Still Lacklustre

 

Local SMEs expect a steady business outlook to continue for the third quarter of 2013 as the Overall Index of the “Standard Chartered Hong Kong SME Leading Business Index” (Standard Chartered SME Index) has edged up 0.7 point to 49.2. Announcing the survey findings today (9 July 2013), the Hong Kong Productivity Council (HKPC) noted the improvement, though the Index is still below the 50.0 no-change mark. The survey also shows that SMEs are willing to recruit new staff, but they are still plagued by rising material costs and rent.

The survey is sponsored by Standard Chartered Bank (Hong Kong) Limited (Standard Chartered Hong Kong), which features an Overall Index comprising five Sub-Indices. Among which, the Sub-Indices for “Staff Number”, “Investment” and “Sales Amount” remain above 50.0, indicating SMEs’ optimism in these areas. In anticipation of the rising material costs, the “Profit Margin” Sub-Index remains under 50.0 to reflect the bleak outlook. SMEs’ confidence in the external environment continues to improve as the “Global Economy” Sub-Index has been rising for four consecutive quarters, though the figure is the least impressive.

For Industry Sub-Indices, all three major industries show negative business sentiment for this quarter. Recording the first drop after rises in three consecutive quarters, the Manufacturing Sub-Index drops 5.4 points to 43.6. The retail industry is no longer optimistic with the Sub-Index goes down 4.9 points to 46.6. Import/export trade and wholesale industry is the only sector that reports a rising Sub-Index - at 49.5, but still below the 50.0 threshold.

Noting the unexpected drop in the Manufacturing Sub-Index, Mr Leo Lam, Director (Business Innovation) of HKPC, said, “The third quarter is the traditional peak season for manufacturers. This year, their business outlook is clouded by the slowing Chinese economy, protectionism in Europe and the US, and the Federal Reserve’s possibility to end its stimulus programme. SME manufacturers are negative about their ‘Sales Amount’ and ‘Profit Margin’ as their orders on hand may be less than expected. Local manufacturers need to brace for the challenge ahead in the coming one or two quarters.”

Mr Jammy Chen, General Manager, SME Banking, Standard Chartered Hong Kong, commented, “SMEs have been pessimistic on the ‘Profit Margin’ Sub-Index, showing that their profit performance is still restrained by other factors like rising material cost, fluctuating currency rates, and market changes, etc.  SMEs are advised to reinforce their cost control measures and pay attention to foreign exchange risks.  They can make use of new technology to lower their operating costs, or consider using appropriate hedging products to mitigate the currency risks.”

Mr Kelvin Lau, Senior Economist of Standard Chartered Hong Kong, said, “Continued fragile external demand and uncertainties surrounding US tapering and China recovery mean that the manufacturing sector could still underperform other sectors in the coming months. We think the dip in Retail Sub-Index should be more of a reflection of external uncertainties weighing on local sentiment – with the Hong Kong unemployment rate still consistent with full employment at 3.4%, domestic fundamentals remain resilient and support our full year GDP forecast of 3.4%. This in turn should mean still strong hiring and investment outlook when one looks beyond near-term uncertainties and challenges.”

This survey also gauged the views of SMEs on their staff turnover rate and difficulty in recruitment after the new statutory minimum wage came into effect. Around 80% of the surveyed SMEs do not foresee a rise in the turnover rate; while only 30% of them consider it more difficult to recruit staff. Together with the findings in the last survey, the results indicate that the new statutory minimum wage does not have any significant impact on SMEs. On the hot topic of information security, in particular e-banking, the survey finds that for SMEs which do not use e-banking services, close to 35% of them said they lack confidence in the security of online transaction.

In terms of operating cost, in the last survey, SMEs felt a relief to rental hikes. This time, they see the return of the pressure again, especially in the retail sector. As compared to the last survey, retailers surveyed who expect a rental increase have outnumbered the last quarter’s by 20 percentage points.

Launched in the third quarter of 2012, this is the fifth survey of the Standard Chartered SME Index. Mr Lam said, “All indices including the Overall Index and Industry Sub-Indices recorded a rise since the launch. The Retail Sub-Index has registered the biggest increase of 10 points. Despite that the overall business environment has continued to improve over the past year, SMEs still weigh their ‘Profit Margin’ and the ‘Global Economy’ negative with related Sub-Indices falling below 50.0. With increasing operating costs, slowdown of the Mainland economy and the end of the quantitative easing policy, SMEs are expected to face a tough fight.”

In this survey, HKPC has conducted telephone interviews with 815 SMEs in eight industry sectors during June 2013. To download a report of the “Standard Chartered Hong Kong SME Leading Business Index”, please visit the website: www.smeone.org. Results of the next survey will be released in October 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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Jonathan Ho
General Manager
Corporate Communications
Tel: (852) 2788 6390
Fax: (852) 2788 5056
Email: jonathanho@hkpc.org
Website: www.hkpc.org

9 July 2013

(From left to right): Mr Gary Cheng, Senior Consultant; Mr Leo Lam, Director (Business Innovation) of HKPC; Mr Jammy Chen, General Manager, SME Banking, and Mr Kelvin Lau, Senior Economist, of Standard Chartered (Hong Kong) Limited, announce the survey results of the “Standard Chartered Hong Kong SME Leading Business Index” for the third quarter of 2013

(From left to right): Mr Gary Cheng, Senior Consultant; Mr Leo Lam, Director (Business Innovation) of HKPC; Mr Jammy Chen, General Manager, SME Banking, and Mr Kelvin Lau, Senior Economist, of Standard Chartered (Hong Kong) Limited, announce the survey results of the “Standard Chartered Hong Kong SME Leading Business Index” for the third quarter of 2013