Hong Kong’s small and medium-sized enterprises have seen a rebound in business sentiment in the second quarter, with the information and communications industry making the strongest showing.
The Hong Kong SAR government’s supportive measures and the promising start of the China economy have provided a boost, economists said.
According to the Standard Chartered Hong Kong SME Leading Business Index released by the Hong Kong Productivity Council (HKPC) on Tuesday, the overall index for Hong Kong SMEs rose by 3.6 points to 47.3, reaching levels seen in the fourth quarter of 2023. Four out of five sub-indices recorded growth.
Among the 11 surveyed industries, the information and communications sector recorded the highest increase of 13.8 points, and the real estate sector followed closely with a growth of 11.2, both industries returning to the level above the midpoint of 50. The retail sector saw an increase of 4.4 points to 43.2, a level similar to the fourth quarter of 2023
The sub-index of “global economy” showed the most significant increase after three consecutive quarters of decline, rising by 9.1 to 39.4, followed by “business conditions”, “profit margin” and “investment sentiment” which increased by 7.2, 6.3, and 0.7 respectively.
“The strong rebound in ‘global economy’ matches the China economy’s solid start to the year so far,” said Kelvin Lau Kin-hang, senior economist of global research for Greater China at Standard Chartered Bank (Hong Kong).
Among the 11 surveyed industries, the information and communications sector recorded the highest increase of 13.8 points, and the real estate sector followed closely with a growth of 11.2, both industries returning to the level above the midpoint of 50. The retail sector saw an increase of 4.4 points to 43.2, a level similar to the fourth quarter of 2023.
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But the accommodation and food services industry witnessed the steepest decline in business confidence, dropping by 4.5 to 42.6. This also marks the second consecutive quarter of decline.
Lau attributed the significant growth in the sectors of information and communications as well as real estate to the supportive measures introduced by the Hong Kong government in the 2024-25 Budget released in February.
The confidence of the retail as well as accommodation and food services industries are closely tied to the tourism sector, Lau added.
Kelvin Lau Kin-hang, senior economist of global research for Greater China at Standard Chartered Bank (Hong Kong), attributed the significant growth in the sectors of information and communications as well as real estate to the supportive measures introduced by the Hong Kong government in the 2024-25 Budget released in February
“Some SMEs in the tourism industry face dual pressures from changing consumption patterns among Chinese mainland visitors and a growing number of Hong Kong residents traveling to mainland cities for shopping and leisure,” Lawrence Cheung Chi-chong, the HKPC’s chief innovation officer, said.
Moreover, Lau noted that the strong exchange rate of Hong Kong dollar has contributed to Hong Kong residents’ preference for traveling outside the city, which has also had an impact on the retail sector of Hong Kong.
In addition to reviving the tourism industry, Cheung said, Hong Kong also needs to continue reshaping its international image as a vibrant events hub, and encourage residents to consume in Hong Kong, thus supporting local businesses and bolstering internal consumption.
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The survey, conducted in March and interviewing 811 local SMEs, found 89 percent of the surveyed enterprises believed that the measures proposed in the 2024-25 Budget, such as tax incentives, financing guarantees for SMEs, and the organization of large-scale events to stimulate tourism, would contribute to overall economy. In addition, more than a quarter of the businesses expressed their desire for further government support in the field of technology and digital transformation.
