Standard Chartered SME Index for Q2 2016 at 40.4 Business Sentiment Falls for Three Consecutive Quarters

The “Standard Chartered Hong Kong SME Leading Business Index” (Standard Chartered SME Index) for the second quarter of 2016 reported a further drop of 2.4 points to 40.4. Releasing the findings today (27 April 2016), the Hong Kong Productivity Council (HKPC) noted a negative business outlook among SMEs as the Index has been declining for three consecutive quarters. If the economic slowdown continues, close to 20% of the SMEs surveyed may consider winding up within one year.

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 the sub-indices have dropped, among which the “Sales Amount” Sub-Index slid markedly to 35.0. The Sub-Index for “Staff Number” (49.4) has gone below the 50 no-change mark for the first time, reflecting that SMEs may freeze hiring in this quarter. The Sub-Indices for “Investments”, “Profit Margin” and “Global Economic Growth” registered at 47.7, 33.9 and 23.2 respectively.

For sectorial findings, all the three major Industry Sub-Indices continue to stay below the 50 threshold. The Manufacturing (39.8) and Import, Export & Wholesale (34.5) industries show no signs of recovery with both Sub-Indices falling below 40 for the first time. As a result of the strong US dollar and unstable global economy, the Import, Export & Wholesale sector is especially pessimistic, with a drastic drop of 7.1 points in the industry Sub-Index. The sector’s sentiment on "Sales Amount", "Profit Margin" and "Global Economic Growth" all fell from 32% to 50%. The Retail Sub-Index fails to keep up the growth momentum in the last quarter and edged down 0.7 points to 42.0, a reflection of their prevailing bearish outlook.

Mr Kelvin Lau, Senior Economist of Standard Chartered Hong Kong, said, "Another weak set of readings this time continue to reflect the high degree of external macroeconomic and financial market uncertainty weighing on local SME sentiment. The fact that all but one industry sub-index fell this quarter shows that the prevailing pessimism is broad-based; having the hiring sub-index falling below 50 for the first time also suggests that the prevailing challenges and uncertainties are finally eroding SMEs’ long-term confidence. The silver-lining is that the Chinese economy and the Renminbi have stabilized somewhat since March, and that Federal Reserve hike expectations have also been priced out, both of which are risk-positive near-term. That said, SMEs in Hong Kong will need to see more sustained data and market improvements before they would start feeling better towards their own business outlook. This means that we need at least one or two more quarters of data before we can confirm that our SME index has bottomed out."

This survey also gauged the views of SMEs on the impact of the economic downturn. 65% of the SMEs surveyed recorded a decline in profits compared to the previous year, with an average drop of 18%. About 67% of respondents expect the economy to improve within two years, while 23% forecast the economic downturn to last for more than two years. If the sluggish situation is here to stay, around 20% of SMEs may consider winding up within one year, among which 5% may even close down within three months. Regarding the effectiveness of external support to their business, 28% of the respondents opt for Government funding programmes, followed by the relaxation in bank financing (13%).

Mr Gordon Lo, Director (Business Management) of HKPC, said, "During economic downturn, companies should make use of technologies as a stimulant for growth. An investment rather than a cost, technologies can raise efficiency, save operational costs and lift their competitiveness in the long run. For instance, Warehouse Management System, Cloud Computing, Customer Relationship Management (CRM) and Enterprise Resources Planning (ERP) systems are applicable to SMEs. Enterprises should look into the ‘Pilot Technology Voucher’ initiative to be announced by the Government in due course, and make use of it to identify appropriate technology solutions for adoption. In support of the Programme, HKPC will help enterprises apply technology solutions to enhance operation and sustain growth amid the economic adversity."

He added that HKPC recently launched the "SME Biz Easy" mobile app, which contains information of over 30 funding schemes, to facilitate SMEs in identifying funding that suit their business needs, as well as obtaining practical business intelligence anytime, anywhere.

Conducted from late March to early April 2016, the survey successfully interviewed 806 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 July 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

* * *

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

27 April 2016

Mr Gordon Lo (centre), Director (Business Management) of HKPC, announces the survey results of the "Standard Chartered Hong Kong SME Leading Business Index" for the second quarter of 2016, accompanied by Mr Wilson Wong (left), General Manager (IT and Business Process) of HKPC; and Mr Kelvin Lau, Senior Economist of Standard Chartered Hong Kong.