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Standard Chartered SME Index for Q1 2016 at 42.8 Business Outlook Remains Bearish, with Stable Recruitment and Investment Sentiment

The “Standard Chartered Hong Kong SME Leading Business Index” (Standard Chartered SME Index) for the first quarter of 2016 reported a further drop of 1.6 points to 42.8. Releasing the findings today (28 January 2016), the Hong Kong Productivity Council (HKPC) noted that the Index is at its record-low level since its launch. Despite the continuous pessimistic business outlook, SMEs’ plans on recruitment remain neutral and their investment sentiment remains cautiously steady.

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, “Staff Number”, which edged up 0.6 to 50.8, is the only Sub-Index that managed to stay above the 50 no-change mark. SMEs are under no immediate pressure to reduce staff amid the sluggish economy. Sub-Indices for “Sales Amount” (40.3), “Profit Margin” (36.6), “Global Economic Growth” (26.2), and “Investments” (48.3) have dropped further. With a mild drop of 0.6, the “Investments” Sub-Index is still close to the 50 mark.

For sectorial findings, all the three major Industry Sub-Indices are still below the 50 threshold. Both the Manufacturing Sub-Index (41.1), and Import, Export & Wholesale Sub-Index (41.6) slid to a record low, reflecting the industries expect a tough market condition ahead. The manufacturing sector is mainly concerned about “Sales Amount” and “Profit Margin”, while the confidence of import-export traders is dampened by worries over the US interest rate hike. Despite the slightly stabilizing Retail Sub-Index with a rebound to 42.7 (up 2.4 points), a pessimistic sentiment still prevails.

Mr Wilson Wong, Acting Director (Business Management) of HKPC, said, "Although confidence among SMEs is below-par at the beginning of the year, we should note that the readings for ‘Staff Number’ and ‘Investments’ remain close to the 50 threshold. We also found that 72% of the surveyed companies intend to maintain the current level of wages; while 26% consider a pay rise with an average increment of 4.1%. There is still no mounting pressure on layoffs and pay cuts at the moment. During the present slow season, however, SMEs should re-examine their strengths and weaknesses, and leverage their competitive edges for further growth. To prepare for the economic rebound, traditional industries should make use of innovation and technologies to add value to their products and services, in addition to saving cost and raising efficiency."

Mr Kelvin Lau, Senior Economist of Standard Chartered Hong Kong, said, “The weak reading of our latest SME Index matched the market’s shaky start to the year, confirming that lingering uncertainties around China’s growth and currency outlook have weighed on near-term business expectations like sales and margins. For now, growth momentum is still weakening across exports, retail sales and mainland tourist arrivals. We believe that China’s growth, while showing early signs of bottoming out, is set to stay soft; Hong Kong sentiment could take even longer to recover, possibly in the second half of 2016. We expect Hong Kong’s GDP to come in at 2.4% this year, flat against last year’s estimate.”

This survey also gauged the usage of online marketing among SMEs. About 48% of the respondents utilize online channels for marketing and promotion. The Information and Communications (76%), and Accommodation and Food Services (74%) industries are the top users; while the Financial & Insurance (25%) and Retail (27%) sectors are the least frequent users. They do not deploy e-marketing due to the “increase in operation expense” (64%), “ lack of an industry-specific online platform” (44%), and “lack of technical staff” (24%).

Mr Wong said, "Local SMEs should step up their efforts in online marketing as going digital and intelligent is the trend in business development. Regarding the lack of proper online platforms for some industries, HKPC can help enterprises establish these platforms to provide integrated information. Also, through our IT consultancy services, HKPC can assist SMEs to use Internet technologies to lift their competitiveness."

Conducted in December 2015, the survey successfully interviewed 809 local 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 April 2016.

For more details about the Index, please contact HKPC’s Kinson Leung at tel. (852) 2788 5795 or email: kinsonleung@hkpc.org. For other media enquiries, please contact Chloe Chau at tel. (852) 2788 6158 or email: chloechau@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 Communication and Marketing
Tel: (852) 2788 6390
Fax: (852) 2788 5056
Email: jonathanho@hkpc.org
Website: www.hkpc.org

28 January 2016

Mr Wilson Wong (left), Acting Director (Business Management) of HKPC; and Mr Kelvin Lau, Senior Economist of Standard Chartered Hong Kong, announce the survey results of the Mr Wilson Wong (left), Acting Director (Business Management) of HKPC; and Mr Kelvin Lau, Senior Economist of Standard Chartered Hong Kong, announce the survey results of the "Standard Chartered Hong Kong SME Leading Business Index"