28 Sept 2018
Policyholder Survey – Prudent Business Outlook while Cost Pressure Increased
HKECIC's recent survey showed that policyholders continued to expect business could be benefited from the improving global economy. However, the proportion of those worrying about raw material cost rose and fluctuation of other currencies increased.
Between June to August 2018, the HKECIC interviewed 423 policyholders on the challenges ahead and their business outlook. All these policyholders are from industries including clothing, electronics, toys, jewellery, plastics and electrical appliances. The proportion of policyholders identifying the increase in credit risks and decrease in orders as the major challenges were 24.9% and 21.7% respectively, increased 0.9 and 0.7 percentage points when compared to previous three months (March to May 2018). Meanwhile, policyholders identified increase in cost of raw materials as the major challenge increased by 3.9 percentage points to 21.4%. Also, proportion of fluctuation of other currencies rose by 3.4 percentage points to 10.1% when compared to previous three months.
Regarding the business forecast for the coming year, the survey revealed that 80.4% of respondents anticipating their business to remain stable. Policyholders expecting their business to increase or decrease accounted for 4.5% and 2.1% respectively. The statistics indicated that policyholders’ attitude towards their business development remained prudent.
For respondents expecting an increase in business, the proportion placing hope on improving global economy continued to increase by 6.9 percentage points to 45.9% when compared to the previous three months (39.0%) while increasing orders accounted for 43.2%, lower than that of previous three months (51.2%). The proportion of placing hope on developing the Mainland domestic market (or the Mainland market) and emerging markets both accounted for 5.4%.
Rising trade conflicts between the US and other major economies could weigh on global economic sentiment and trade expansion going forward, posing downside risks to Hong Kong's export outlook.
Policyholders are advised to:
- Maintain close contact with the buyers and confirm whether the products are affected if contracts have been signed;
- Clarify the Incoterms adopted in connection with the delivery of goods, as well as the obligation of buyers and sellers so as to define the tariff payment obligation if the products are included in the list of goods that are subjected to tariff; and
- Incorporate terms in the contracts stating the obligation of buyers and sellers to safeguard their interest if contracts have not been signed.