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Standard Chartered SME Index for 2014 Q4 at 47.9

The latest "Standard Chartered Hong Kong SME Leading Business Index" (Standard Chartered SME Index) has dropped to 47.9 (down 3.4 points from the last quarter), reflecting a pessimistic business outlook among local small and medium enterprises. Announcing the reading for the fourth quarter of 2014 today (29 October 2014), the Hong Kong Productivity Council (HKPC) noted that it is the first time in a year the Index has fallen below the 50 no-change mark, and also at its lowest in two years. 
 
Sponsored by Standard Chartered Bank (Hong Kong) Limited (Standard Chartered Hong Kong), the quarterly survey features an Overall Index comprising five Sub-Indices. In this quarter, all Sub-Indices have dropped. In the areas of "Staff Number" and "Investments", a cautiously optimistic outlook prevails with the Sub-Indices down marginally at 51.5 and 52.2 respectively - still above the 50 mark. "Sales Amount" (49.5), "Profit Margin" (41.5) and "Global Economic Growth" (38.0), however, report significant drops.
 
For Industry Sub-Indices, Manufacturing and Retail Industry Sub-Indices have risen to 48.3 and 51.9 respectively. The Retail Industry Sub-Index goes above 50 again as the fourth quarter is traditionally a rosy period for retailers. On the other hand, affected by the fall in Manufacturing Industry Sub-index in the last quarter, and a decline in confidence on the global economy, the Import, Export and Wholesale Industry Sub-Index has fallen to 44.9 (down 5.5 points from the third quarter).
 
Mr Gordon Lo, Director (Business Management) of HKPC, said, "With recent reports of weak performance in the US, European and Chinese economies, and various international organizations lowering their economic growth forecasts, SMEs' pessimistic outlook on 'Global Economic Growth' is no surprise. With this Sub-Index falling to its lowest for 18 months after rising for two years, it simply reflects that confidence on the global economy remains fragile. Also, the commencement of mass protests has affected overall business sentiments. All in all, SMEs' business outlook has turned from positive in the third quarter to negative in the fourth quarter, resulting in an overall index below 50."
 
Mr Kelvin Lau, Senior Economist, Standard Chartered Hong Kong, said, "The weakening of sentiment among our survey respondents matches the recent rise in market volatility driven by worries towards slowing global growth momentum and the end of the US Federal Reserve's quantitative easing. Softer-than-expected September export growth in Hong Kong, albeit still expanding year-on-year, echoes the near-term challenges faced by manufacturers and trading companies. Local political uncertainty also appears to have had some negative psychological impact on sentiment. Despite the still challenging backdrop, we believe Hong Kong's fundamentals remain resilient enough to weather both internal and external headwinds in fourth quarter of 2014."
 
The survey also studied SMEs' use of cloud services. Over half of the companies interviewed said they would keep company emails at the servers of email service providers, while about 15% used cloud storage services such as Dropbox, Google Drive, etc.
 
Mr Lo said, "Although some SMEs have already used cloud-related services in their daily operation, most of the respondents still do not consider data security as the most important criteria in selecting service providers. With cloud-related hacking incidents on the rise, SMEs should pay attention to the network security of service providers when choosing cloud services. They can also make use of the upcoming Retail Technology Adoption Assistance Scheme to upgrade their information systems."
 
This survey also gauged the views of SMEs on universal retirement protection scheme. Around one-third of the respondents oppose the creation of such scheme while 54% says they can bear up to 3% increases in related expenses each month.
 
Conducted from September to early October this year, the survey successfully interviewed 804 SMEs. 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 2015.
 
For more details about the Index, please contact HKPC's Dr Gary Cheng at tel. (852) 2788 6178 or email: garyc@hkpc.org. For other media enquiries, please contact Felix Chan at tel. (852) 2788 5036 or email: felixchan@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
 
29 October 2014
 
Mr Gordon Lo, Director (Business Management) of HKPC (centre) announces the survey results of the
Mr Gordon Lo, Director (Business Management) of HKPC (centre) announces the survey results of the "Standard Chartered Hong Kong SME Leading Business Index" for the fourth quarter of 2014 with Mr Gary Cheng, Senior Consultant of HKPC (left); and Mr Kelvin Lau, Senior Economist of Standard Chartered Hong Kong.