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Policyholder Survey - Concern of Rising Credit Risk amid Lacklustre Global Trade

ECIC’s recent survey showed that policyholders have been prudent about the export outlook owing to an upward path of the US interest rate and a lacklustre global economy. The proportion of policyholders perceiving decreasing orders continued to be the main challenge, while that of worrying higher credit risk continued to increase.

Between March and May 2016, the ECIC interviewed 640 policyholders on the challenges ahead and their business outlook. All these policyholders are from industries including clothing, electronics, toys, jewellery, plastics and electrical appliances. Regarding the business forecast for the coming year, owing to the deterioration of external trade, the proportion of policyholders identifying rising credit risk as the major challenge rose further to 24.6%. Decrease in orders amounting to 30.9%, dropped by 4.5 percentage points when compared to previous three months, remained the greatest challenge. In addition, the proportion of policyholders identifying direct competition from Mainland China’s manufacturers/exporters as the major challenge amounted to 12.5%, rising by over 3 percentage points.

However, the number of respondents anticipating their business to remain unchanged rose from 72.7% to 75.6% when compared to previous three months (December 2015 to February 2016); policyholders expecting their business to increase continued to rise by 2.1 percentage points to 10.9%. Policyholders expecting their business to decrease dropped to 7.2% from 13.4%. The statistics indicated that policyholders’ attitude towards their business development was improving compared to the previous three months.

 

Chart: Business outlook for next 12 months
Chart: Business outlook for next 12 months

 

For the respondents expecting an increase in business, the proportion placing hope on increasing orders surged by 7.3 percentage points from 42.2% to 49.5% but the overall number of policyholders remained low. As the world economy is beset by feeble growth, the proportion of placing hope on improving global economy dropped slightly from 25.5% to 24.7% when compared to previous three months.

Chart: Challenges faced by the Hong Kong exporters
Chart: Challenges faced by the Hong Kong exporters

 

Manage Risks Prudently to Counter Fluctuations in External Environment

With the normalisation of interest rate in the US and divergent monetary policies introduced by major central banks, the global trade growth is likely to remain subdued. Exporters should pay more attention to country and buyer risks. With effect from 1 March 2016, “Small Business Policy” offers permanent concessions, including permanent waiver of $1,000 annual policy fee and premium discount of 20%, helping SMEs to reduce operating costs and enhancing their competitiveness in the industry. More information is available on the ECIC Website www.hkecic.com.

 

Content provided by Picture: Hong Kong Export Credit Insurance Corporation
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