HK exporters told to diversify to ASEAN as trade confidence collapses

HONG KONG - With the Hong Kong Trade Development Council’s Export Index dropping from 54.1 in the second quarter (2Q18) to 35.8 in the third quarter (3Q18) due to the ongoing China/US trade dispute,  Hong Kong exporters are being urged to diversify into emerging markets such as Southeast Asia.

. “The Index indicates that, although Hong Kong’s exports grew 10% in July, local exporters are obviously becoming less confident in the near-term future,” the HKTDC’s Director of Research, Nicholas Kwan, said today.

The impact of the ongoing Sino-US trade friction was becoming ever more apparent,” he said.

“More than one-third of respondents surveyed (36.1%) reported that their export performance had been negatively affected, a substantial increase from 21.3% in the second quarter.

“Of exporters who reported a negative impact from the trade friction, more than half (53%) had seen buyers making smaller orders, while a quarter (25%) said they had to bear the cost of the extra tariffs imposed.

“We have revised our 2018 export growth forecast for Hong Kong from 6% to 3% as trade friction between the Chinese mainland and the US creates additional uncertainty.”

Kwan said local exporters were advised to diversify their business into emerging markets such as the ASEAN region, which had become an economic powerhouse with its rapid growth over the past decade.

“ASEAN  had a GDP of US$2.76 trillion in 2017, making it the world’s sixth-largest economy,” he said. “With an annual growth forecast at around 5%, ASEAN is expected to become the fourth-largest economy by 2030.”

HKTDC Economist Doris Fung said concerns over a slowdown in export growth were reflected across all major industries, but electronics posted the biggest fall, from 55.2 in 2Q18 to 35.4 in 3Q18. Clothing also suffered a sizable decline to a reading of 32.8, the lowest among key industries.

“Toys, at 43.6, was the most resilient sector, followed closely by timepieces at 43.5, and machinery at 42.5,” she said. “Jewellery continued the downward slide it exhibited over previous quarters, with a reading of 38.5.”

Fung said key markets were unlikely to remain unaffected.

“The US does not appear to be very promising, posting a reading of 39.8,” she said. Japan (48.9) and the European Union (43.3) also fell back into contractionary territory. “The Chinese mainland scored 50.2, the highest among major export markets.”

The HKTDC Export Index monitors the current export performance of Hong Kong traders and gauges their near-term prospects. Readings above and below 50 indicate positive and negative sentiment respectively. www.hkrdc.org (ATI).