Standard Chartered SME Index for Q2 2017 at 45.6 Marked Improvement in Global Economic Outlook Fuels Business Confidence

The “Standard Chartered Hong Kong SME Leading Business Index” (Standard Chartered SME Index) for the second quarter of 2017 has significantly rebounded 3.7 to 45.6, the highest reading since the third quarter of 2015. Releasing the findings today (20 April 2017), the Hong Kong Productivity Council (HKPC) noted that the business confidence of local SMEs is gradually picking up as the Index edged closer to the 50 demarcation. Business sentiment continues to improve, with 60% of the surveyed SMEs did not express any pressure to wind up, as compared to 25% a year ago.

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, the “Staff Number” Sub-Index (51.7) remained positive, despite a mild drop of 0.9. The Sub-Indices for “Investments” (49.0), “Sales Amount” (44.2), “Profit Margin” (40.2) and “Global Economic Growth” (35.8) all went up. Notably, the 50% increase in the “Global Economic Growth” indicates that speculations on the impacts of global market volatility have been gradually digested in recent years.

For sectorial findings, all the three major Industry Sub-Indices continued to fluctuate around the 40 mark. Driven by the higher readings in “Profit Margin” and “Global Economic Growth”, the Manufacturing Sub-Index increased 2.2 to 41.4. The Import, Export & Wholesale (39.8) and Retail (38.4) Sub-Indices, edged up 0.7 and down 0.5 respectively, were similar to last quarter’s readings. On the contrary, all other industries displayed a positive note. The “Accommodation and Food Services” (50.0) and “Financial & Insurance” (57.5) sectors were the most upbeat, with the Sub-Indices up 34% and 20% respectively.

Mr Kelvin Lau, Senior Economist of Standard Chartered Hong Kong, said, “Global sentiment has rebounded evidently since the beginning of the year. This has been fuelled by a stabilising China and a still-strong US economy, good enough for both central banks to raise their interest rates recently. China’s manufacturing PMI rose to an almost 5-year high in March, while the US Conference Board Consumer Confidence Index was at the highest level since December 2000, despite looming geopolitical worries. It is therefore not a surprise that Hong Kong’s own measure of SME confidence is also enjoying a broad-based rebound of its own, led by a 50% jump in the ‘Global Economic Outlook’ Sub-Index. The fact that the Manufacturing Sub-Index rebounded the most among the three major industries also indicates that the prevailing recovery is mostly being driven by external factors. While lingering external uncertainties could still cap the extent of Hong Kong’s economic rebound in 2017, we now appear to be in a stronger position to weather such challenges compared with a quarter or two ago.”

Following the surveys in the second and the fourth quarters of 2016, this survey continued to track the views of SMEs on the economic condition and the implications on their business survival. Among those respondents who agreed Hong Kong is facing an economic downturn or instability, only 10% may consider winding up their business within one year if the sluggish situation is here to stay; while 60% saw no such crisis. Clearly, the business sentiment has significantly improved as compared to the second and the fourth quarters last year. Back then, only a respective 25% and 47% of respondents felt no pressure of business closure.

The survey also explored SMEs’ expectation from the Government on business support and technology adoption. Regarding SME support measures, most surveyed companies opted for “One-off Relief Measures” (47%), followed by “Tax Reform” (45%) and “Solution on Mandatory Provident Fund (MPF) Offsetting Mechanism” (28%). In view of the Government proposal to progressively abolish the offsetting mechanism of MPF schemes, about 33% of SMEs might convert their employees into contract staff, with “Professional and Business Services” (49%), “Accommodation and Food Services” (43%) and “Real Estate” (40%) industries showing the biggest concern.

On the other hand, the top three Government support SMEs looked to for technology adoption are “Financial Assistance” (64%), “Talent Development” (41%) and “Technology Platforms (such as e-Commerce platform, Cloud platform, etc)” (35%).

Mr Gordon Lo, Director (Business Management) of HKPC, said, “Apart from funding and manpower, SMEs also need technology platforms to support their business development. The ‘Inno Space’, to be set up by HKPC, will be one of these practical platforms to facilitate the sharing of technologies and skills with start-ups in realizing their innovative ideas into product prototypes or commercialization-ready products. It aims to support a start-up culture and the long-term development of local industries. Also, a ‘Big Data’ service platform has been rolled out recently to assist SMEs in collecting business-related data for better strategic planning.”

Conducted during the second half of March 2017, this survey successfully interviewed 824 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 April 2017

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 second 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.