Standard Chartered SME Index for Q3 2016 at 41.1 Business Confidence Stabilizes with Improved Recruitment Sentiment

After declining for three consecutive quarters, the “Standard Chartered Hong Kong SME Leading Business Index” (Standard Chartered SME Index) for the third quarter of 2016 took a breather with a 0.7-point increment, reaching 41.1. Releasing the findings today (4 August 2016), the Hong Kong Productivity Council (HKPC) noted signs of stabilizing business confidence in local SMEs, yet the global economy is expected to fall further.

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” (51.1) is the only Sub-Index that turns positive. Despite an increase of 5.1 and 2.3 points respectively, the Sub-Indices for “Sales Amount” (40.1) and “Profit Margin” (36.2) remain far below the 50 no-change mark. On the other hand, both Sub-Indices for “Investments” (46.1) and “Global Economic Growth” (16.0) drop further. The drastic slip of 7.2 points in the latter reflects intensifying worries over the global economy.

For sectorial findings, all the three major Industry Sub-Indices continue to stay below the 50 threshold. The Manufacturing (37.8) and Retail (38.3) Sub-Indices drop 2.0 and 3.7 points respectively. This is the first time that the Retail Sub-Index falls below 40 since the last quarter of 2012 - an indication of the worsening business confidence among retailers. With the third quarter being the traditional trading season, the Import, Export & Wholesale sector shows improving confidence towards “Sales Amount”, and the Industry Sub-Index registers at 37.7 (up 3.2 points). Yet the industry outlook stays bearish.

Mr Kelvin Lau, Senior Economist of Standard Chartered Hong Kong, said, “Even though the headline index has rebounded, breakdown continues to show signs of underlying sentiment weakness. The third quarter of 2016 is the first time having sub-40 readings across all three main industries, suggesting no evident economic growth driver for now. Their ‘global economic outlook’ sub-indices are also all below 20, also a first on record, reflecting Brexit-induced cautiousness weighing on already fragile market sentiment. We believe external headwinds are bound to start improving, albeit only gradually, later in the year, led by a stabilizing China economy. In the meantime, we do not see a quick turnaround in business environment for HK SMEs.”

This survey also gauged the views of SMEs on the impact of Brexit. Only 25% of the respondents remarked that it may affect their business, with nearly half of this group worried that it will trigger currency fluctuations (51.4%), a decline in business transactions (17.1%), and stock market volatility (11.1%).

Mr Gordon Lo, Director (Business Management) of HKPC, said, “Although the impact of Brexit is yet to crystalize, SMEs should be cautious of potential volatility across the European and global economies triggered by the exit arrangement. In addition to closely watching the economic changes, SMEs should keep track of the latest market and technology developments in order to plan ahead to contain risks and brace for the evolving situation.”

This survey also measured information security awareness among SMEs and found that nearly 40% respondents have little knowledge of information security. In the past year, about 13% of the surveyed companies encountered information security incidents with major issues being “interruption of computer operation” (32%), “information/password being stolen” (20%) and “network/website downtime” (15%).

Mr Lo said, “As SMEs have become easy targets of cyber attacks in recent years, it is important for SMEs to raise awareness on information security. To protect their important information and data asset, enterprises should regularly backup their computer data and keep an offline copy, keep security software updated, and patch systems and other software. The Hong Kong Computer Emergency Response Team Coordination Centre of HKPC also provides information and support services to help companies keep up their vigilance against cyber threats.”

Conducted in July 2016, this survey successfully interviewed 862 local SMEs. To download a report of the “Standard Chartered Hong Kong SME Leading Business Index”, please visit SME One website.

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.

* * *

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.

* * *

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

4 August 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 third quarter of 2016, accompanied by Mr Jimmy Chim (left), Consultant (IT and Business Process) of HKPC; and Mr Kelvin Lau, Senior Economist of Standard Chartered Hong Kong.