Here are the 3 sub-indices that dropped in Hong Kong SME survey

Suggesting a more broad-based economic recovery.

In a survey of Hong Kong SMEs, it was found that all three of the study’s main industry sub-indices – manufacturing, import/export/wholesale, and retail – actually drop in Q3, only to be compensated for by significant improvements in other segments of the economy.

According to a research note from Standard Chartered, taking off from the results of the Standard Chartered Hong Kong SME Leading Business Index (SME Index), jointly released by Standard Chartered and the Hong Kong Productivity Council, this suggests that while the current economic recovery may be mild, it is becoming more broad-based.

The manufacturing sub-indices fell across the board, especially investment (-10% q/q), sales (-13%) and profit margin (-12%).

The import/export/wholesale sub-index fared better, with the headline reading down a mere 2% to an above-neutral 50.4.

The retail sector headline reading declines to 47.7 from 51.0 in Q2-2014, led by its investment sub-index, which drops to 49.0 from a very strong 57.4.

Here’s more from Standard Chartered:

The SME Index is created, and the survey is conducted, by the Hong Kong Productivity Council and is sponsored by Standard Chartered Bank (Hong Kong) Limited.

It is forward-looking in that it measures company sentiment for the coming quarter. The most recent survey was conducted in June 2014, and managers of 819 SMEs across eight industries were interviewed.

The survey contains 12 standard questions to capture the changes SME managers expect in various aspects of their business in the coming quarter.

The Leading Index is a composite index based on the diffusion indices for five of the surveyed areas: (1) number of staff, (2) investment, (3) sales, (4) profit margin, and (5) the global economic outlook.

An index reading above 50.0 means that the respondents are generally optimistic about the business environment in the coming quarter, while a reading below 50.0 indicates predominantly pessimistic sentiment.

The SME Index’s headline reading rebounds to 51.3 in Q3-2014 from 50.8 in Q2-2014. Four of five index sub-components improve from Q2, led by a 4pt jump in the “global economic outlook” to 46.9, the highest level on record for this sub-index.

This echoes our longstanding view that the Hong Kong economy, highly open in nature, will be supported by better US and European growth performance in H2-2014.

Recent evidence of capital inflows (with the Hong Kong Monetary Authority needing to inject liquidity into the system to keep the Hong Kong dollar from strengthening beyond the strong-side Convertibility Undertaking of the currency peg) also reflects Hong Kong benefiting from the still-accommodative policies of major central banks around the world.