Moderate Rebound for Hong Kong Exports Expected in 2010

Pushed by a gradual recovery of the world economy, Hong Kong exports led by electronics are set to rebound moderately by five per cent in 2010, according to a Hong Kong Trade Development Council (HKTDC) report which also warns exporters of uncertainties and challenges in the year ahead.

Signs of the rebound are evident in the HKTDC Export Index, which monitors the export performance and prospects of Hong Kong traders. The quarterly survey, which forms the basis for the index, is published in the latest issue of the HKTDC Trade Quarterly .

During the fourth quarter of 2009, the index returned to expansionary territory for the first time in more than two years, rising to a level of 53. A reading above 50 indicates predominant optimism among respondents. Most of the optimists in the survey said they saw buyers building up inventory.

“Exporters are largely optimistic over the medium-term,” said HKTDC Chief Economist Edward Leung. “Some 44 per cent of our surveyed companies believed their export performance would be better in the coming year as a whole compared to this year, while 28 per cent thought their businesses would perform at about the same level next year. Their optimism seems well-grounded and more than just wishful thinking.”

In an environment of continued low interest rates, many expect excessive liquidity to sustain rallies in asset prices in some locations, prompting a rebound in consumer and business confidence in selected markets, such as the Chinese mainland.

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Indian banks choose the Hong Kong gateway

Punjab National Bank (PNB), India's second largest public sector lender, is the latest in a string of Indian banks favouring Hong Kong as their base for expansion.

In December, PNB continued a trend by opening its first branch in Hong Kong. Since 2004, major Indian banks including Bank of Baroda, Bank of India, Indian Overseas Bank, Allahabad Bank and Axis Bank, the former UTI Bank, have either launched or expanded their presence in the city.

ICICI cites strong growth

It is now two years since India's ICICI Bank open its regional office in Hong Kong, and Chief Executive and Regional Head, Asia, Madhav Kalyan, is delighted with the results so far. Citing better than expected growth, Mr Kalyan said he is "very happy with the location". "Hong Kong offers us everything we need to build our business in North Asia," he said.

ICICI opened in partnership with the Bank of East Asia, with whom it continues to work closely, especially in developing India ? China relations. One of the primary drivers of its Hong Kong business is India-related syndicated loans, Mr Kalyan said.

"Hong Kong continues to play a key role. As an international financial centre, most of the banks in North Asia participate in the syndicated market out of Hong Kong. It is a very vibrant market for syndicated loans and bonds."

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Highlights:

• The Hong Kong economy is back in full health, with the real GDP rising above trend for more than two years, up by 8.6% in 2004, 7.3% in 2005 and 8.2% in the opening quarter of 2006. Domestic demand has resumed its growth momentum and is now playing an increasing role in the current economic upturn, while impressive performance was exhibited in merchandise trade and inbound tourism.

• Hong Kong's fiscal account achieved a surplus of US$ 1.7 billion for the fiscal year 2005/06, reverting its course of deficits since 1998/99 (except for a small surplus in 1999/2000).

• Inflation has been edging up, with consumer prices rising by 1.1% in 2005 and 1.8% in the first half of 2006.

• Once reaching almost 9% in 2003, Hong Kong's unemployment rate fell to 5% in the second quarter of 2006.

• Hong Kong's exports and imports of goods grew by 8.5% and 10.8%, respectively in January-May 2006.

• A total of 23.4 million visitors, or 3.4 times the size of local population, came to Hong Kong in 2005, representing a 7.1% increase from a year earlier. Tourist arrivals grew further by 11.6% in January-May 2006.

• On top of the provisions granted in earlier phases of the CEPA, further liberalisation measures covering ten services sectors were announced on 29 June 2006 to deepen the economic and trade relations between Hong Kong and the mainland. These measures will take effective from 2007 and are expected to help expand the business scope allowable in China for Hong Kong companies and lower the thresholds to set up business or provide services there.
  

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