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HKPC Announces 2019 Q2 Standard Chartered Hong Kong SME Leading Business Index - SMEs Anticipate Greater Bay Area Planning to Benefit Hong Kong on Global Stage

(Hong Kong, 24 April 2019) The Hong Kong Productivity Council (HKPC) today announced the second quarter result of the “Standard Chartered Hong Kong SME Leading Business Index” (Standard Chartered SME Index). Compared with the first quarter, the Overall Index of the second quarter increased by 5.6, reading at 46.0, which was the sharpest increase over the past three years. The result indicated that SMEs are rebuilding their confidence in doing business gradually.

In the second quarter of 2019, all the five sub-indices* of the Overall Index in the Standard Chartered SME Index increased simultaneously. Among all, “Staff Number” (53.0) remained at a positive level; “Investments” (49.7), “Sales Amount” (45.6) and “Profit Margin” (42.3) increased by 3.5, 7.6 and 7.6 respectively. “Global Economic Growth” recorded a relatively large increase of 10.4, bouncing back to 26.5.

In terms of industry, the three key sub-indices increased simultaneously. The “Import/Export Trade and Wholesale Industry” sub-index increased by 6.9 to 44.2. All the five sub-indices of the above industries also increased, in which “Staff Number” returned to a positive level. The “Manufacturing Industry” (40.4) and “Retail Industry” (38.7) sub-indices both increased by 6.0 and 2.6. Despite this, the “Retail Industry” sub-index was still lower than 40.0, which revealed the Industry’s negative outlook on business environment.

Mr Kelvin Lau, Senior Economist of Standard Chartered Hong Kong said, “What we are seeing is a very broad-based rebound in SME confidence after a battered Q1 -- probably a normalisation after being materially weighed down by prior deterioration in US-China trade dispute. We believe the latest readings are more in line with the fundamental picture, where a combination of better trade negotiation news headlines, a more dovish Fed in the US and generous policy stimulus in China should help create a floor to broad sentiment; but those alone are probably not enough to boost headline index back about 50 for now, or at least not until we see more concrete signs of the global business cycle bottoming out. And while the underperformance of the ‘Retail Industry’ sub-index this time was a disappointment, we believe some form of a catch-up is in store thanks to a still-tight labour market and rising local asset prices, both supporting household spending. All this adds conviction to our view that Hong Kong’s growth trajectory remains on track (albeit a modest and gradual one) to reaccelerate over the course of 2019 after a soft start to the year.”

In response to the launch of the Outline Development Plan for the Guangdong-Hong Kong-Macao Greater Bay Area (GBA), 75% respondents expected the advantage of Hong Kong’s international status would be strengthened or remain unchanged. Among the surveyed SMEs, industries including Information and Communications Industry (52%), Finance and Insurance Industry (42%) and Real Estate Industry (42%) anticipated to have a higher chance to benefit from the GBA development plan. Besides, 28% surveyed SMEs would refer to the GBA development plan to formulate the company’s development plan, while 26% would speed up digital transformation accordingly.

Dr Lawrence Cheung, Chief Innovation Officer of HKPC, said, “Local SMEs confidence are seen bouncing gradually, despite the uncertainties in global economic headwinds. SMEs are encouraged to speed up their digitalisation progress and expand their business in the fast-growing ASEAN markets and grasp opportunity of the GBA Planning. HKPC is dedicated to support enterprises to explore the GBA by organising seminars regularly for the industry to exchange latest market technology and information. Despite this, HKPC has been promoting the government’s enhanced ‘Dedicated Fund on Branding, Upgrading and Domestics Sales’ (the BUD Fund), to further assist Hong Kong enterprises in exploring the ASEAN and the Mainland China markets as well as regions that will sign Free Trade Agreement with Hong Kong later on.”

The Survey of Standard Chartered SME Index for Q2 2019 was conducted in March 2019. The survey interviewed 813 local SMEs successfully. The report can be downloaded from the SME One Website (www.smeone.org).

*The five Sub-Indices are "Staff Number", "Investments", "Sales Amount", "Profit Margin" and "Global Economy Growth".

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Dr Lawrence Cheung, Chief Innovation Director of HKPC (centre); Mr Clement Li, General Manager of Management Consulting of HKPC (left), and Mr Kelvin Lau, Senior Economist, Greater China, Standard Chartered Bank (Hong Kong) Limited (right), announced the Overall Index increased by 5.6 to 46.0 at a press conference of the “Standard Chartered Hong Kong SME Leading Business Index 2019 Q2”, which was the sharpest increase over the past three years.Dr Lawrence Cheung, Chief Innovation Director of HKPC (centre); Mr Clement Li, General Manager of Management Consulting of HKPC (left), and Mr Kelvin Lau, Senior Economist, Greater China, Standard Chartered Bank (Hong Kong) Limited (right), announced the Overall Index increased by 5.6 to 46.0 at a press conference of the “Standard Chartered Hong Kong SME Leading Business Index 2019 Q2”, which was the sharpest increase over the past three years.