Analyst warns against 'patchy' recovery in Hong Kong trade

Global improvements provide little respite.

According to Hang Seng Bank's HK Economic Monitor, the recovery in the advanced economies has thus far provided little benefits for Asian exporters, and the city is no exception. Hong Kong’s exports declined 1.3% in August, giving back some of the gains made in the previous month. Imports also dipped 0.2% during the month, from a growth of 8.3% in July.

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Import demand from the US has so far lagged its GDP growth, which partly explains why Hong Kong's export rebound remains subdued this year.

Hong Kong’s exports to the US contracted in four of the past five months. We believe this is more related to the nature of the latest US recovery, which was concentrated in auto, residential housing and mining sectors, and tend to have a non-tradable bias.

Growing demand for capital goods in Japan also did little to support its Asian neighbours. In fact, Hong Kong’s exports to Japan have plummeted for seven consecutive months.

Shipments to mainland China showed renewed weakness (-3.6%) in August, but this may largely be due to the high base effect as growth was very strong in August last year. 

The pullback in exports provides a clear reminder that the trade recovery momentum remains patchy. However, we envisage that a modest improvement in the global environment will bring export growth back to positive territory towards the year end, although not at the high rates that prevailed prior to the global financial crisis.

Incoming figures, such as the US Institute for Supply Management’s (ISM) Manufacturing Index and Eurozone Purchasing Managers’ Index (PMI), all point to a constructive turn in the global trade cycle.

The spikes in the US ISM Manufacturing Index and EU PMI are particularly encouraging in that these have historically been reliable leading indicators for East Asian exports. The launch of new mobile phone models in mid-September could be  another driver to boost Q4 trade performance.