Standard Chartered SME Index Reaches 50.0, Fuelled by Growing Confidence

 

With confidence picking up, for the first time in 1.5 years, local SMEs put aside a negative business outlook. The Overall Index of the “Standard Chartered Hong Kong SME Leading Business Index” (Standard Chartered SME Index) for the fourth quarter of 2013 has edged up 0.8 point to the 50.0 no-change mark. Announcing the latest survey findings today (10 October 2013), the Hong Kong Productivity Council (HKPC) noted the Index is at its record-high level since its launch. 
 
Sponsored by Standard Chartered Bank (Hong Kong) Limited, the quarterly survey features an Overall Index comprising five Sub-Indices. In this quarter, all Sub-Indices, including “Staff Number”, “Investments”, “Sales Amount”, “Profit Margin” and “Global Economic Growth” are at record-high levels when comparing with previous readings. As against the same period last year, SMEs are gaining confidence in the business environment, especially in terms of “Sales Amount” and “Global Economic Growth”. 
 
For Industry Sub-Indices, besides Import/Export Trade and Wholesale Industry, both Manufacturing and Retail Industry Sub-Indices show improvement compared with the third quarter of 2013. The Retail Industry Sub-Index has reached its record-high of 53.0 (up by 6.4 points). Manufacturing Industry Sub-Index has increased 4.5 points to 48.1, getting close to the 50.0 no-change mark. Meanwhile, the Import/Export Trade and Wholesale Industry Index slightly drops 0.1 point to 49.4.
 
Mr Gordon Lo, General Manager (IT & Business Management) of HKPC, said, “The rebound of economic indicators for the manufacturing industry and the upswing of the Mainland’s economy contribute to the rising confidence in business outlook for manufacturing SMEs. In particular, a huge rise is recorded for ‘Sales Amount’. The figures also reflect a trend in shortened order cycle. Manufacturers regain confidence in their business prospect as they expect to see more orders after their traditional peak season in the third quarter. However, this trend is placing pressure on their production and delivery capacity. Manufacturers are advised to adopt new management systems, such as ‘Quick Response Management System’, to enhance the response rate and to cope with the market demand. On the global economic outlook, the survey also notes that more than 50% of respondents in this sector express negative sentiments in this quarter – the least optimistic among all industries. Manufacturers need to brace for the challenge ahead.” 
 
Retail Industry Sub-Index recorded a significant rise in this quarter, reflecting that SME retailers are fairly positive on the projected sales in their traditional peak season. Mr. Lo added, “The retail industry is optimistic on ‘Profit Margin’, which leads the Sub-Index edging up 12.9 points to 50.9 - the first time above 50.0. More than 80% of respondents expect the profit margin will improve or remain unchanged in this quarter. As the global economy is recovering, retailers are more positive on the business outlook comparing with the same period last year. Moreover, the survey notes that retailers are relieving from the pressure of high rental cost. Nearly 70% of respondents do not worry about rising rental in this quarter. Nevertheless, we would continue to monitor the impact of China’s Tourism Law and uncertainties in the global economy on the industry. SME retailers should enhance their service standards and create unique ‘Customer Experience’ to attract more local and overseas customers.”   
 
Regarding operating cost, SMEs have a relatively positive view on rent compared with the past five quarters as more SMEs predict rental cost has reached its peak. Nearly 90% of respondents in the Real Estate Industry believe that rent will not rise in this quarter. While there are signs of SMEs being relieved from the pressure of high rental cost, around 30% of SME respondents still feel the heat.
 
“The latest SME Index results echo our growing optimism towards global growth outlook.  We are seeing more evidence that growth is resuming in Europe (at least for now), accelerating in the US and Japan, and stabilising in China,” said Kelvin Lau, Senior Economist, Standard Chartered Bank (Hong Kong) Limited. “Also, the market disruption caused by the US Federal Reserve’s signaling of its Quantitative Easing tapering plans is over, in our view. Hong Kong has weathered plenty of external headwinds over the past quarter, its resilience reflected in USD-HKD trading steadily near the strong side of the Convertibility Undertaking threshold (7.75). This should give Hong Kong’s SMEs a good basis to build on recent improvements for a better fourth quarter of 2013 and 2014.”
 
This survey also gauged the views of SMEs on business expansion to the Mainland. Overall score for China business sentiment is 5.6 (out of 10). SMEs regarded the huge market potential as the biggest draw for doing business in the Mainland, especially for service industries such as information technology and communications (ITC), as well as professional and business services. Government policy and legal system of the Mainland, on the other hand, are the main pull factors, to be followed by operating costs. More than 30% of respondents from industries that require considerable investments, such as manufacturing and ITC, cited operating cost as the main obstacle for enter the market.
 
In this survey, HKPC has conducted telephone interviews with 800 SMEs in eight industry sectors during September 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 January 2014.
 
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 Carina Frianeza at tel. (852) 2788 6158 or email: carinaf@hkpc.org. 
 
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About “Standard Chartered Hong Kong SME Leading Business Index”
The “Standard Chartered Hong Kong SME Leading Business Index” is a forward-looking survey on local SMEs’ outlook on the overall business environment for the next quarter. For each quarterly survey, HKPC’s professional team interviews more than 800 local SMEs from the manufacturing, import/export trade and wholesale, retail, accommodation and catering services, information and communications, finance and insurance industry, professional services, and real estate industries. It covers SMEs’ outlook on their ‘sales amount’, ‘profit margin’, ‘investments’, ‘staff number’, and ‘global economic growth’ for the next quarter.
 
The Index is announced in January, April, July and October to provide a useful reference for the public and SMEs in making strategic decisions and resource allocation amid the changing business environment.
 
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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
 
10 October 2013
 
 
Mr Gordon Lo, General Manager (IT & Business Management) of HKPC (centre) announces the survey results of the “Standard Chartered Hong Kong SME Leading Business Index” for the fourth quarter of 2013 with Mr Gary Cheng, Senior Consultant of HKPC (left); and Mr Kelvin Lau, Senior Economist, of Standard Chartered (Hong Kong) Limited
 
Mr Gordon Lo, General Manager (IT & Business Management) of HKPC (centre) announces the survey results of the “Standard Chartered Hong Kong SME Leading Business Index” for the fourth quarter of 2013 with Mr Gary Cheng, Senior Consultant of HKPC (left); and Mr Kelvin Lau, Senior Economist, of Standard Chartered (Hong Kong) Limited
 
 
 

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