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Standard Chartered SME Index for Q3 2017 at 44.3 Business Confidence Picking Up Slowly

The “Standard Chartered Hong Kong SME Leading Business Index” (Standard Chartered SME Index) for the third quarter of 2017 failed to keep up the growth momentum of the last quarter, with a drop of 1.3 points to 44.3. Releasing the findings today (20 July 2017), the Hong Kong Productivity Council (HKPC) noted that despite the Index has been fluctuating for four consecutive quarters, the Overall Index has increased 3.2 points year-on-year, reflecting a slowly improving business confidence of local SMEs.

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 only the “Staff Number” Sub-Index (50.9) remained positive. The Sub-Indices for “Investments” (47.0), “Sales Amount” (43.6), “Profit Margin” (39.0) and “Global Economic Growth” (32.9) dropped 2.0, 0.6, 1.2 and 2.9 points respectively.

For sectorial findings, all the three major Industry Sub-Indices are still far below the 50 threshold, hovering around 40. The Manufacturing (42.1) and Retail (41.9) Sub-Indices, which increased 0.7 and 3.5 points respectively, are the only two sectors with improved sentiment in this quarter. The notable increase of the Retail Sub-Index was driven by retailers’ improving outlook on “Sales Amount”. With fragile confidence in “Profit Margin”, the Import, Export & Wholesale Sub-Index failed to sustain its growth momentum and slid 1.8 points to 38.0.

Mr Kelvin Lau, Senior Economist of Standard Chartered Hong Kong, said, “We knew the strong start to 2017, both in terms of growth and sentiment, was too good to be true, and are therefore not surprised to see the SME Index correcting lower in the third quarter. We have long been calling for a mild slowdown in global growth in the second half of 2017, mainly on the back of still-tight monetary conditions in both the US and China. The risk of an escalation in geopolitical tension in the region could also start weighing on local sentiment. Hong Kong should not be immune to all this. The good news is that the latest headline SME Index is still materially higher than last year’s levels, and that two of the three main Industry Sub-Indices actually improved quarter-on-quarter. This adds conviction that the Hong Kong economy is not slipping back into the 2016 trough.”

The survey also gauged the views of SMEs on the digital competitiveness of Hong Kong and the degree of "digitalization" in their business process. On a scale of 1-5 (with 5 being the highest score), SMEs expressed that Hong Kong is most competitive digitally in "Cybersecurity" (3.29), but less so in "E-commerce" (2.83) and "E-payment" (2.61).

On the other hand, 33.2% of surveyed companies are actively digitalizing their business process. Despite the recent cyber security incidents, almost all respondents in this group (98.5%) would not consider to suspend or abandon their “digitalization” plans. Around 90% of these companies have already taken relevant cyber security measures in their course of “digitalization”, with “Regular backup” being the most popular measure (70.2%), followed by “Strengthening network security” (61.2%), and “Enhancing cyber security knowledge” (40.4%).

Mr Gordon Lo, Director (Business Management) of HKPC, said, “The survey revealed that local SMEs have yet to catch up with their counterparts in the Mainland and overseas in the application of E-commerce and E-payment. They must speed up their digitalization process in order to sharpen their competitiveness in the international market. At the same time, they should not overlook the importance of cyber security. In addition to sharing the latest security information with SMEs and the public through our ‘Hong Kong Computer Emergency Response Team Coordination Centre’, HKPC will launch a series of programmes to help enterprises enhance their digital competitiveness. To start with, we will assist the tourism industry in IT adoption.”

Conducted during the second half of June 2017, this survey successfully interviewed 844 local SMEs. To download a report of the “Standard Chartered Hong Kong SME Leading Business Index”, please visit the website: www.smeone.org.

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 aims 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 Division
Tel: (852) 2788 6390
Fax: (852) 2788 5056
Email: jonathanho@hkpc.org
Website: www.hkpc.org

20 July 2017

Mr Gordon Lo (centre), Director (Business Management) of HKPC, announces the survey results of the 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 2017, 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.