Business confidence among the Hong Kong Special Administrative Region’s small-and medium-sized enterprises (SMEs) edged up slightly for the fourth quarter, although the US election outcome cast a shadow over potential Chinese mainland export tariffs and interest rate cuts, an economist said.
The Standard Chartered Hong Kong SME Leading Business Index for the fourth quarter climbed by 3.2 to 45.7 from the previous quarter, returning to the level of the third quarter last year, according to the quarterly survey published by the Hong Kong Productivity Council on Thursday.
A score above 50 suggests respondents have confidence in the business environment, while a reading below 50 reflects a pessimistic sentiment.
“The 3.2 increment quarter-over-quarter was in part boosted by the major policy pivots in the US Fed with its jumbo rate cut in September and (the mainland’s) outsize monetary and fiscal stimulus package,” said Kelvin Lau Kin-hang, senior economist of Global Research for Greater China of Standard Chartered Bank Hong Kong.
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Three of the five component subindices showed robust growth. Profit margin rose 6.8 points to 41.9, the global economy advanced 6.7 points to 36.2, and business conditions improved 4.9 points to 44.3, all rebounding to levels seen in the second quarter of this year.
Recruitment sentiment grew slightly to 50.6, while investment sentiment dipped to 48.9, below the watershed of 50, suggesting SMEs maintain a cautiously optimistic outlook.
“The absence of a quarter-over-quarter improvement in ‘investment sentiment’, in particular, is a reflection of SMEs needing further policy support and additional external tailwinds to lift their still-cautious longer-term business outlook,” Lau noted.
Lau said the reelection of former US president Donald Trump would require SMEs to carefully monitor the new administration’s tariff policies, noting that lower-than-expected tax rates could boost business confidence.
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He said he expected the US Federal Reserve would maintain its rate-cutting trajectory next year, with the interest rate potentially dropping to between 3 and 3.5 percent.
Trump, who will assume the US presidency in January, has said that he plans to impose an additional 60 percent tariffs on US imports from the mainland.
Lau said that with upcoming key political meetings — including the Central Economic Work Conference, and next year’s two sessions — the central government is likely to roll out additional economic support measures that could help offset any negative impact of Trump’s return to power.
On investment trends, 93 percent of surveyed SMEs said they plan to maintain or increase spending this quarter, with a focus on digital transformation, particularly IT systems and e-commerce training.
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SMEs anticipate a slowdown in cost increases, as only 19 percent of SMEs expect to raise staff salaries this quarter, down 8 percentage points from the previous quarter and continuing a downward trend that began in the second quarter of 2024.
By sector, accommodation and food services led the gains with a 9.4-point rise to 49, followed by real estate and information and communications.
Among the 11 industry indices, only professional and business services and construction showed declines.
The survey covered over 800 SMEs in various sectors, including manufacturing, import, export trade and wholesale, retail, accommodation and catering services, information and communications, finance and insurance, professional and business services, real estate, and construction industries.
