Sharp cut in HK's export forecast

Top News | Reuters and Tereza Cai 11 Jun 2019

Hong Kong's export growth forecast for the year has been lowered from 5 percent to 2 percent by the Trade Development Council amid the Sino-US trade dispute that is affecting the global supply chain and slowing growth in major economies.

The export confidence index - HKTDC Export Index - edged down from 39.2 in the first quarter to 37.3 in the second, reflecting the continuing concern across industries.

Nicholas Kwan Ka-ming, director of research of the council, said it is not ruling out a further cut in the forecast if the dispute escalates.

The export index, starting from the middle of last month, indicated that half the surveyed exporters expected their level of sales to be affected over the coming months.

The survey showed that 55 percent of exporters were worried about the negative impact of the trade dispute.

More than 52 percent saw their clients cut orders, nearly 40 percent were forced to cut prices, and 36 percent shifted procurement from the mainland to other regions.

The council said significant growth of 7.3 percent was recorded for Hong Kong's exports last year, partly due to strong global demand and on account of the advance shipments initiated by some exporters in order to avoid higher tariffs.

In the first four months of the year, Hong Kong's total exports dropped 2.5 percent year-on-year.

With the index staying in contractionary territory for the fourth consecutive quarter, the uncertain market environment is likely to negatively impact Hong Kong's export growth near term.

As the drop was relatively small - 1.9 points - this may suggest that the fall in exporter confidence has now plateaued, the council said.

China's exports, meanwhile, unexpectedly returned to growth last month - rising 1.1 percent from a year earlier - despite higher US tariffs, blowing past analysts' expectations, according to China customs data.

Imports fell 8.5 percent last month, a further sign of weak domestic demand that could prompt Beijing to step up stimulus measures.

Rare earth exports by China, the world's dominant producer, fell 16 percent in May from a month earlier amid an increased focus on raw materials due to the trade war, although the drop was in line with usual trading.

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