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Policyholder Survey - Rising Risk in Emerging Markets while Diverging Recovery in Traditional Markets

ECIC’s recent survey showed that policyholders’ attitude towards business development in the coming year remained conservative. This is attributed to a slow-growing global economy, volatilities on the financial landscape and deflationary pressure worldwide. Furthermore, the major challenges foreseen are decrease in orders and rising credit risk. Policyholders have become less confident with the Mainland China domestic market and emerging markets mainly due to a slowdown in the growth of emerging economies and moderation in China during its restructuring process.

Between December 2015 and February 2016, the ECIC interviewed over 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, the numbers of respondents anticipating their business to remain unchanged decreased by 7.8% to 72.7%; policyholders expecting their business to decrease continued to increase by 4.2% to 13.4%, the highest proportion in the past one year and a half. At the same time, policyholders expecting their business to increase rise slightly from 6.5% to 8.8% when compared to previous three months (September to November 2015). The statistics indicated that policyholders have a cautious attitude towards their business development in the coming year and expect the export business to be affected by the global economic uncertainty and weak demand.

 

Chart: Business Outlook for Next 12 Months
Chart: Business Outlook for Next 12 Months

 

As global economic growth is anticipated to be sluggish and patchy, the proportion of the major challenges currently faced by policyholders demonstrated an increasing trend. The greatest challenge identified was decrease in orders, amounting to 35.4%, similar to the previous three months. The proportion of policyholders identifying rising credit risk as the major challenge increase from 18.5% in the previous three months to 20.9%, the highest in two years. The rate of respondents worrying about increase in cost of raw materials also rises to 12.3%.

 

Chart: Challenges Faced by the Hong Kong Exporters
Chart: Challenges Faced by the Hong Kong Exporters

 

Permanent Concessions on SBP

Despite a steady economic recovery in the US, the prospects of traditional markets such as the euro zone and Japan are still weak and further monetary easing is expected. Coupled with China’s economic slowdown, the external environment is still overcast by considerable uncertainties. Exporters, particularly SMEs, should manage risk more prudently while expanding their business. 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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