Hong Kong optimistic for business rebound in third quarter, as coronavirus cases spike
Businesses in Hong Kong, Guangdong, and Macau are expecting a noticeable easing of contractionary pressure in the third quarter, after facing a challenging second quarter due to Covid-19.
As companies hope for a rebound, Hong Kong’s coronavirus situation worsens. On 22 July, Hong Kong authorities chose to extend strict social distancing measures, as authorities reported a surge of over a hundred new locally-transmitted infections.
The inaugural Standard Chartered GBA Business Confidence Index showed that the 'current performance' index for business activity in the Greater Bay Area stood at 37.0 for the second quarter, which is below the neutral line of 50. On the other hand, the 'expectations index' stood at 47.0, suggesting a marked improvement expected in the third quarter, and the 'new orders' sub-index stood above the neutral 50 mark.
Among the Greater Bay Area’s industries, innovation and technology is expected to improve the fastest, followed by financial services.
Kelvin Lau, senior economist, Greater China, Standard Chartered says survey reflects the “continued normalisation of activity within China, boosted by aggressive monetary and fiscal policy easing”.
“This pick-up is driven by domestic more than external demand, matching the general perception that China is the first country to begin recovering from Covid-19," adds Lau.
Guangzhou and Shenzhen were seen to lead the way in the post-Covid rebound, while Hong Kong lagged. Among companies that plan to expand to other GBA cities, Shenzhen, Zhuhai and Hong Kong are the top preferred destinations.
"Shenzhen proved the most resilient in Q2 and is expected to return to economic expansion in Q3 along with Guangzhou. These cities' encouraging performance may be because these finance- and technology-centred cities provide a base for larger companies with greater sustainability and more cash flow,” says Lau.
“For intra-GBA expansion, Shenzhen and Hong Kong are favourable because they are well-established core cities with high spending power, and Zhuhai is the closest city to Macau and well connected to Hong Kong via the Hong Kong-Zhuhai-Macau Bridge.”
The index also found current performance index for credit was at 45.3, but the sub-components indicate lower borrowing costs from both banks and non-bank financial institutions as well as improvement in banks' attitude towards lending.
The GBAI is compiled based on a quarterly survey of at least 1,000 enterprises in key business sectors across the Greater Bay Area, conducted by the HKTDC in collaboration with Standard Chartered.
Nicholas Kwan, director of Research, HKTDC, says: "We are seeing strong policy support from the central government for turning the Greater Bay Area into a global business and innovation centre, by expediting infrastructure connectivity, building advanced manufacturing and modern services industries, and developing a high-quality 'living circle'.”