27 Dec 2018
Bumper Year for Exporters
Hong Kong exporters have achieved a bumper year in 2018, with total exports rising 9.8% year on year to HK$3.45 trillion (US$441 billion) for the first 10 months of this year. The Hong Kong Trade Development Council (HKTDC), releasing the latest 2018 export figures and forecast for 2019, said the mood among exporters had become cautious in an increasingly uncertain global environment.
The HKTDC Export Index for the final quarter of 2018 fell slightly from the previous quarter.
Commenting on the export performance in the first 10 months, HKTDC Director of Research Nicholas Kwan said growth was driven by strong global demand and some exporters’ arrangements for early shipments to pre-empt tariff implementation. Exports to emerging markets showed more impressive growth, including emerging markets in Europe (34% higher), Latin America (a 16% increase) and Africa (up 16%). He expected exports would rise 3% in volume and 5% in value in 2019.
“The global economy could see increasing uncertainty and slower growth in the year to come,” Mr Kwan said. “However, there have been some positive developments recently − progress made in the Sino-US trade negotiations, for example, and the way Hong Kong exporters have proactively found ways to offset the impact of the trade friction − that make us cautiously optimistic regarding the prospects for Hong Kong’s export performance.”
The HKTDC Export Index monitors the current export performance of Hong Kong traders and gauges their near-term prospects. Readings above and below 50 indicate positive and negative sentiment, respectively. HKTDC Assistant Principal Economist (Greater China) Alice Tsang said the reading for the final quarter of 2018 edged down slightly by 0.6 points to 35.2, following the previous quarter (when it went down 18.3 points to 35.8). “The flattening of the decline shows that exporters’ negative emotions have not further deteriorated amid the ongoing Sino-US trade friction,” Ms Tsang said.
Compiling the index, the HKTDC Research Department found 51% of exporters expect sales to increase or remain unchanged over the coming year. Exporters remained wary because of uncertainty created by rising trade protectionism and geopolitical friction, which may see the underpinning fundamentals deteriorate, disrupting trade and investment flows and undermining long-term growth.
In the US, the growth in both private consumption and business investment remained robust in 2018, a development that inevitably stimulated import demand. In the case of the European Union, growth was driven by increasing business confidence, low financing costs and lightened up labour market conditions. Similarly upbeat was Mainland China, which turned in a strong economic performance, with improved domestic and external demand both contributing. The picture was less rosy in Japan, however, with a number of natural disasters in the third quarter of the year impeding both its export and consumption capabilities. Elsewhere in Asia, though, the growth of many of the developing economies remained relatively robust, largely on account of greater regional integration and increased domestic demand.
In terms of products, electronics remained the primary driver of growth, up 14% year on year in the first 10 months of 2018 and accounting for about 68% of Hong Kong’s total exports. In the clothing sector, where exporters have been exposed to increased competition from alternate production bases, exports showed a decline of 3.3%. For its part, the timepiece sector recorded only a marginal increase, leaving it to exports of high-end jewellery to show the highest growth for the period in question, although the toy sector also delivered significant growth. For household electrical appliances, however, increased competition saw exports fall by 6%.
Higher unit values for Hong Kong exports also contributed to a growth in sales value. The unit value index increased by 1.8% in 2017 and 2.5% over the first nine months of 2018. Improving overseas demand, along with steadier commodity prices, helped to support export prices.
Despite the challenges to the world trade environment, the cyclical recovery of the global economy has maintained its momentum through 2018 and is expected to continue into 2019. According to the International Monetary Fund, the global economy will grow 3.7% in 2018 and remain steady at the same rate in 2019.
The global outlook remained uncertain, however. The leading source of concern is lingering uncertainties caused by the Sino-US trade dispute. In addition, less accommodative monetary conditions in major economies, such as the European Central Bank’s plan to end quantitative easing towards the end of 2018, and sustained geopolitical friction could also create uncertainty over trade and investment flows.
Given the continuing momentum of global economic growth, and the recent progress in Sino-US trade negotiations, HKTDC Research said it was cautiously optimistic about the prospects for Hong Kong’s export performance, expecting a 5% growth in exports in 2019. This forecast is supported by the latest HKTDC Export Index survey, in which 51% of the exporters surveyed said they expected their sales to increase or remain unchanged over the coming year. The survey also found that 57% of exporters believed their unit prices would increase or remain unchanged.
Hong Kong’s toy exports were boosted strongly by the release of new video game consoles in 2017 and continued to grow in 2018. Looking ahead, prospects for the market hinge on whether there will be a release of new game console models in the near-term. The markets for e-sports and smartphone games are both on the rise. However, Hong Kong’s export statistics may not fully record Hong Kong’s toys business as it mostly takes the form of offshore trade, with shipments bypassing Hong Kong.
Hong Kong’s exports of watches and clocks enjoyed a slight increase in 2018 and are expected to remain stable in 2019. Smartwatches, which are compatible with smartphones and other digital devices, will remain the key growth engine for Hong Kong’s watch exports. The rapid development of electronic payment may further boost the global demand for wearable tech. Growing demand for craftsmanship and design may also boost sales of hybrid watches, which perform some of the basic functions of a smartwatch, but also display a sense of craftsmanship.
Less robust economic growth is likely to affect Hong Kong’s jewellery exports. Growing conservatism among consumers may weaken demand for high-end items, although the rising popularity of accessible items that feature good branding, design, quality and craftsmanship may help support jewellery sales. Demand for gold jewellery is likely to be propped up by the consumer appetite for gold in major markets such as the mainland and India. Other jewellery, including platinum and diamonds, may also remain popular.
Full report [http://hong-kong-economy-research.hktdc.com/business-news/article/Economists-Pick-Research-Articles/Hong-Kong-Export-Outlook-for-2019-Cautiously-Optimistic-Amid-Lingering-Trade-Tensions/rp/en/1/1X32LK39/1X0AFX45.htm]