According to a new survey released, sentiments among Hong Kong SMEs are increasingly optimistic as the trade tension between US and China has appeared to have eased. The survey involved 813 Hong Kong based SMEs.
Confidence among business owners for the second quarter rose 5.6 points to 46 on a quarter on quarter basis in the Standard Chartered Hong Kong SME Leading Business Index. That followed declines in confidence in the past two quarters.
The Hong Kong Productivity Council and Standard Chartered compiles the index quarterly. Sentiments are considered optimistic when the index is above 50. The index has only been above 50 once since the survey began in 2015.
“What we are seeing is a very broad-based rebound in SME confidence after a battered first quarter – probably a normalisation after being materially weighed down by prior deterioration in the US-China trade dispute”, said senior economist for Greater China at Standard Chartered, Kelvin Lau. “We believe the latest readings are more in line with the fundamental picture, where a combination of better trade negotiation news headlines, a more dovish Fed in the US and generous policy stimulus in China should help create a floor to broad sentiment”.
The improved confidence comes as Washington and Beijing have said they are moving closer to resolving a trade war that has been waged between the two major powers since early last year.
The trade tensions have weighed on Hong Kong’s economy, which grew at its slowest quarterly pace in two years in the fourth quarter. GDP grew at 1.3 per cent in the quarter. According to the most recent data available from the Hong Kong government, this is the lowest level of GDP growth since the first quarter 2016.
Overall, confidence is returning to Hong Kong, particularly with regards to staffing, sales and profit margins. Of the 831 SMEs surveyed, 45 per cent said they believed the Greater Bay Area initiative would strengthen the city’s international status.