Hong Kong SMEs set sights on a better Q3

This, after a soft start to 2014.

Small and medium-sized enterprises (SMEs) in Hong Kong expect better conditions in Q3-2014 after a soft start to the year.

According to a research note from Standard Chartered, the Standard Chartered Hong Kong SME Leading Business Index (SME Index), jointly released by Standard Chartered and the Hong Kong Productivity Council, rebounds to 51.3 in Q3-2014 from 50.8 in Q2-2014.

The report noted that Standard Chartered’s respondents are clearly feeling the lift from the improving global economic outlook.

Tthe corresponding sub-index, while still below the neutral 50 mark, climbs to the highest level in Q3 since records began to be kept in Q3-2012.

Three (hiring, sales and profit margin) of the four other main sub-indices also rise in Q3, mirroring recent indications of a stabilisation in macro data both locally and in China.

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.

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.