Standard Chartered SME Index for Q3 2018 at 49.7 Neutral Business Confidence Clouded by US-China Trade War Uncertainties

The “Standard Chartered Hong Kong SME Leading Business Index” (Standard Chartered SME Index) for the third quarter of 2018 has remained unchanged, reading at 49.7. Releasing the findings today (25 July 2018), the Hong Kong Productivity Council (HKPC) noted the start of the US-China trade war could spell uncertainties on future business outlook.

Sponsored by Standard Chartered Bank (Hong Kong) Limited (“Standard Chartered Hong Kong”), the quarterly survey features an Overall Index comprising five areas. In this quarter, the Sub-Indices for “Staff Number” (52.7), “Investments” (53.9) and “Sales Amount” (50.3) remained positive. The “Global Economic Growth” Sub-Index is registered at 42.8, up 4.0 points from the last quarter, while the “Profit Margin” Sub-Index is down 2.0 points to 43.5.

For sectorial findings, the manufacturing industry sub-index rises for three consecutive quarters to 45.1. The Import, Export and Wholesale Sub-Index (49.6) has also risen by 5.8 points, with the “Sales Amount” reading turning positive. Although the Retail Sub-Index has edged down 0.4 points to 48.2, retailers remain optimistic on “Staff Number” and “Investments”.

Mr Kelvin Lau, Senior Economist, Greater China, Standard Chartered Hong Kong, said, “Our latest survey was conducted at a time when US-China trade tensions escalated, providing a good glimpse into the impact of external uncertainty on local sentiment. The results are encouraging, with the headline number staying stable since the second quarter, and the ‘Global Economic Outlook’ Sub-Index rebounding (albeit only marginally). Stronger investment appetitive is another bright spot, indicating recovering confidence in the underlying local economy that, in our view, looks to remain solid. The risk, however, is for sustained trade war concerns to create headwinds in the coming quarters for manufactures, exporters and importers. The drop in ‘Financial & Insurance’ Sub-Index is also a reminder that Hong Kong remains susceptible to increased market volatility amid rising trade worries.”

This survey also gauged the views of SMEs on the management of corporate bank accounts and “Virtual Banks”. They in general manage their bank accounts through visits to “Branch Counter” (45%) or “Online Banking” (43%). Around 22% of the companies surveyed spend over 8 man hours weekly on average on banking matters, and nearly 80% agree that digital technologies can help reduce the processing time.

Moreover, while 46% of surveyed SMEs have heard about “Virtual Bank”, 23% are reluctant to adopt virtual banking service. For those interested in using the service, “Cybersecurity” (77%) and “System stability” (61%) are the key factors in service selection.

Mr Gordon Lo, Director (Business Management) of HKPC, said, “In the digital era, enhancing productivity with technologies is an irresistible trend for all industries. The Hong Kong Monetary Authority has taken the lead in encouraging the introduction of virtual banking in Hong Kong. Doing away with physical branches, virtual banks draw on innovative technologies such as artificial intelligence to offer a new fast and convenient experience for their customers. However, there are concerns about the security of online transaction. With the emergence of FinTech, the associated cybersecurity risks cannot be overlooked. The Hong Kong Computer Emergency Response Team Coordination Centre of HKPC will closely monitor the development of virtual banks and offer timely security advice to service operators and users. ”

Conducted during the second half of June 2018, this survey successfully interviewed 811 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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David Pun
Senior Manager
Corporate Development
Tel: (852) 2788 5045
Fax: (852) 2788 5056
Email: davidpun@hkpc.org
Website: www.hkpc.org

25 July 2018

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 2018, accompanied by Mr Wilson Wong (left), General Manager (Information Technology) of HKPC; and Mr Kelvin Lau, Senior Economist, Greater China, Standard Chartered Hong Kong.