Sentiment continues to improve, Hong Kong has the highest expectations
Standard Chartered and the Hong Kong Trade Development Council (HKTDC) today released the Standard Chartered GBA Business Confidence Index (GBAI) for the third quarter of 2024. The “expectations” index rose for a second straight quarter to 55.2 from 54.8 in Q2, reflecting sentiment continued to improve modestly among firms. The “current performance” index for business activity fell to 50.6 from 54.1 in Q2, indicating a further weakening of economic momentum after a challenging first half of 2024.
Hong Kong leads bulls
At city level, Hong Kong and Dongguan registered improvements in both current performance and expectations sub-indices. Hong Kong posted the highest “expectations” index, rising to 58.8 from 49.7 in Q2, the steepest rise among the 11 Guangdong-Hong Kong-Macao Greater Bay Area cities, while “current performance” slightly increased by 0.2 points to 47.3. The “expectations” index of the other five cities in the survey were all above the 50 neutral mark.
In line with the soft set of China macro data in July and August, the sub-indices for industry categories trended down in general, with the manufacturing sector suffering the most. In terms of “expectations”, while GBA manufacturers’ confidence may have been affected by a potential surge in US tariffs against China-origin products in the event of a Trump win in the November US presidential election, the score remained stable at 54.1, well above the neutral mark.
Kelvin Lau, Senior Economist, Greater China, Standard Chartered, said: “The survey findings are in line with the economic data released in August, pointing to a slower industrial production, retail sales and fixed asset investment growth on subdued domestic demand and adverse weather. Nevertheless, it is noteworthy that the optimism associated with China’s stronger-than-expected stimulus package introduced in late-September, together with the new phase of Fed’s rate cut cycle, has yet to reflect in the third quarter survey findings. We believe the business sentiment among GBA companies can be boosted in the near term, driven by the positive sentiment and jump in equity market turnover following the announcement of the stimulus measures.”
60% GBA companies express concerns over risk factors – rates, economic growth and trade barriers topped the list
While the rate-cutting cycle can serve as a tailwind to business, the market outlook remains challenging. 60% of respondents saw external and internal risks posing a substantial risk to their overall business in the next 12 months. “Higher global inflation and interest rates” (47%), “renewed China growth slowdown” (46%) and “trade tariffs, sanctions against China-origin products” (42%) were the top three concerns. The Fed’s recent jumbo rate cut in September, signalling potential relief to GBA companies, likely offset lingering trade and geopolitical risks in the run-up to the US presidential election.
During the survey period, the discussion on tariff hikes against products of Chinese origin arose again. In terms of trade barriers, 47.2% of respondents said they were negatively impacted by tariff hikes versus 44.2% by sanctions and 34.6% by non-tariff barriers.
In the event of further rise in trade disputes between China and the US/EU, of the 37% survey respondents involved in external trade and anticipating a change to their external trade in the next few months, 88% said they would front-load their second-half export orders, while 81% said they would front-load their imports to minimise the potential impacts to their businesses.
Irina Fan, HKTDC Director of Research, said: “GBA manufacturers may have concerns about a potential surge in US tariffs against China-origin products after the November US election. However, some 50-60% of the respondents do not anticipate any potential negative impacts on their business.”
About the GBAI
The GBAI is the first forward-looking quarterly survey in the market that looks at the business sentiment and synergistic effects in cities and industries across the GBA. It is compiled based on a survey of more than 1,000 companies in the GBA covering the manufacturing and trading, retail and wholesale, financial services, professional services and innovation and technology sectors. The index enables investors and businesses to better understand the current business climate, gauge future performance prospects and formulate their market strategies for the GBA.
Related materials
Standard Chartered GBA Business Confidence Index Report: https://www.sc.com/hk/gba/gba-index-report/
HKTDC Research: https://research.hktdc.com/en/article/MTgyMTM1MTk5Nw
About Standard Chartered
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Standard Chartered PLC is listed on the London and Hong Kong Stock Exchanges.
The history of Standard Chartered in Hong Kong dates back to 1859. It is currently one of the Hong Kong SAR’s three note-issuing banks. Standard Chartered incorporated its Hong Kong business on 1 July 2004, and now operates as a licensed bank in Hong Kong under the name of Standard Chartered Bank (Hong Kong) Limited, a wholly owned subsidiary of Standard Chartered PLC.
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About HKTDC
The Hong Kong Trade Development Council (HKTDC) is a statutory body established in 1966 to promote, assist and develop Hong Kong’s trade. With 50 offices globally, including 13 in Mainland China, the HKTDC promotes Hong Kong as a two-way global investment and business hub. The HKTDC organises international exhibitions, conferences and business missions to create business opportunities for companies, particularly small and medium-sized enterprises (SMEs), in the mainland and international markets. The HKTDC also provides up-to-date market insights and product information via research reports and digital news channels. For more information, please visit: www.hktdc.com/aboutus. Follow us on Twitter @hktdc and LinkedIn
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