Business sentiment among Hong Kong’s small and medium-sized enterprises for the second quarter of this year has hit a record low as the economic fallout from the coronavirus pandemic intensifies, a new survey has shown.
SMEs’ confidence in the local business environment for April to June plunged by nearly 7 points from the first quarter to 26.2, with all the five component sub-indices in retreat, and the business condition sub-indices recording the biggest drop, according to the Standard Chartered Hong Kong SME Leading Business Index released by the Hong Kong Productivity Council on Tuesday.
The latest survey confirmed unprecedented weak sales and margin expectations, and the likelihood of the unemployment rate accelerating, with an overall 43.2 reading for the ‘hiring’ component
Kelvin Lau Kin-hang, Greater China senior economist of global research at Standard Chartered Bank Hong Kong
“The latest survey confirmed unprecedented weak sales and margin expectations, and the likelihood of the unemployment rate accelerating, with an overall 43.2 reading for the ‘hiring’ component,” said Kelvin Lau Kin-hang, Greater China senior economist of global research at Standard Chartered Bank Hong Kong.
Among the industry sub-indices, the manufacturing sector saw the steepest drop of 8 points to 26.2 compared with the previous quarter.
The survey, conducted from early to mid-March this year, covered 806 local SMEs. A reading above 50 in the index indicates optimistic sentiment, while a reading below 50 reflects pessimism.
“The single-digit ‘global economic outlook’ shows widespread apprehension over global business demand as lockdowns and travel bans point to more severe contractions in the coming quarters,” said Lau.
He expected the Chinese mainland to be the first to emerge from the health crisis, but the current recession in the rest of the world is likely to weigh on its recovery. Hong Kong, he said, is unlikely to see a rebound in external trade, tourism, business investment and financial activity in the short term.
The Hong Kong government on Monday reported an 8.9 percent year-on-year dive in the city’s gross domestic product for the first three months of this year — the steepest quarterly plunge on record.
StandChart forecasts that Hong Kong’s economic performance could worsen in the second quarter with Europe and the United States among the worst hit by the pandemic, and the SAR cannot be immune to the global recession.
However, if the pandemic continues to ease, Lau said the manufacturing sector may recover sooner than the retail business, but Hong Kong’s jobless rate is likely to climb to 5.2 percent by the end of the year.
Battered by the US-China trade row and last year’s social unrest, coupled with the social distancing restrictions enforced to halt the spread of the virus, the Hong Kong economy remains on track to shrink by 4.8 percent in 2020, with the second quarter being the worst quarter, Lau said.
The latest survey also explored SMEs’ deployment of digital technology in promoting their businesses, and employees working from home during the pandemic. It found that 81 percent of the SMEs polled hoped for government support in facilitating digital technology deployment.
It found that 41 percent of the SMEs do rely on electronic or online platforms to sell or promote their products, with 63 percent promoting their products or services through social media.
Edmond Lai Siu-bun, chief digital officer at the HKPC, urged SMEs to keep an eye on the “Distance Business Program” launched by the government during the second round of the Anti-epidemic Fund to help enterprises continue their operations and services through the adoption of IT solutions. He said the program, totally subsidized by the government, will be open to applications on May 18.
Lai also noted that the first-ever “Fund Fair Go Online” event, organized by the HKPC’s SME ReachOut through webcast, was launched to help enterprises overcome difficulties when applying for government funding, and provide them support and matching services.
Global French investment bank Natixis said more help is urgently needed for SMEs across Asia to ensure there’re still jobs for people as countries and regions come out of lockdowns imposed as a result of the pandemic.
