The HKTDC Export Index fell 7.3 points to 40.5 in the third quarter of 2023, caused primarily by weak global demand, in line with weakness in exports across the region.

Economic risks remained exporters’ top concern. Almost half of survey respondents (48.6%) saw economic slowdowns or recession risks in overseas markets as the biggest challenge, followed by ongoing geopolitical tensions (17.9%) and a smaller-than-expected boost from Mainland China’s economic recovery (16.5%).

Despite the softened export sentiment, traders intend to adopt pro-growth business strategies to strengthen their resilience in the longer term.

Pro-growth business strategies

While increased marketing and promotional activities (41.4%) remained exporters’ key strategies in the third quarter, a significantly higher number of exporters said they plan to provide a wider range of value-added services (40.5%, up 19.2 percentage points).

The third top strategy is to stabilise finances to ensure sufficient cash flow (32%, up 4.7 percentage points). Diversifying sales to additional markets (26.3%) and increasing e-commerce activities (25.7%) were also among the five most popular strategies identified.

Hong Kong Trade Development Council (HKTDC) Director of Research Ms Irina Fan said in response to an uncertain global business environment, traders are adopting a more cautious approach. “At the same time, they are still eager to grow their businesses with proactive measures, such as stepping up marketing and promotional activities, offering more services and expanding to new markets,” she added.

Exporters tend to keep low inventory 

Local exporters tended to run down on inventory (51.5) in the third quarter, suggesting they are holding slightly lower-than-normal inventory, compared with higher-than-normal stocks (48.5) in the second quarter. 

Ms Fan added: “Keeping low inventory levels may mean exporters are trying to minimise the costs of holding stocks and ensure that sufficient resources are available to respond promptly to buyers’ demands.”

More than 70% of the respondents said they are currently operating at smaller-than-normal capacity in terms of manpower and production equipment.

Brighter spots

HKTDC Senior Economist Ms. Cherry Yeung said the sentiment towards all key export markets was below 50, but local exporters are more optimistic about the Asian market, being the most positive about ASEAN (41.6), followed by Japan (39.1) and Mainland China (38.6).

While export confidence was highest in the toys (42.2, down 13.2 points) and electronics (40.8, down 6.9 points) sectors, confidence levels have dropped substantially regarding timepieces (32.9, down 15.9 points).

Stable or higher export profitability expected

New orders activity also remained weak. The Current New Orders Index fell 12.5 points to 32.6 in the third quarter. However, exporters are more positive about new orders in the fourth quarter, resulting in an overall Expected New Orders Index of 46.2.

Despite that, exporters remained mostly optimistic about their operations’ profitability outlook and shared similar views as in the second quarter. The majority of respondents (61.7%) expected to see stable (34.3%) or higher (27.4%) profit margins.

Based on a quarterly HKTDC survey of 500 exporters from six major industries – clothing, electronics, jewellery, machinery, timepieces and toys – the index above 50 indicates an optimistic outlook and below 50 as pessimistic.

Two new markets – India and Taiwan – were added to provide insights into additional markets in the HKTDC Export Index for the third quarter of 2023. The study now covers seven major export markets contributing some 85% of Hong Kong’s total exports (in value terms).

Taking all these factors into account, HKTDC Research has revised its forecast for Hong Kong’s export growth this year to between -7% and -9%.

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References

HKTDC Research website: https://research.hktdc.com/en/

HKTDC Export Index 3Q23: Export sentiment softens from two-year high: https://research.hktdc.com/en/article/MTQ4NzAxNDQ3Mw

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Media enquiries

Please contact the HKTDC’s Communication and Public Affairs Department:

Jane Cheung, Tel: +852 2584 4137, Email: jane.mh.cheung@hktdc.org

About HKTDC

The Hong Kong Trade Development Council (HKTDC) is a statutory body established in 1966 to promote, assist and develop Hong Kong's trade. With 50 offices globally, including 13 in Mainland China, the HKTDC promotes Hong Kong as a two-way global investment and business hub. The HKTDC organises international exhibitions, conferences and business missions to create business opportunities for companies, particularly small and medium-sized enterprises (SMEs), in the mainland and international markets. The HKTDC also provides up-to-date market insights and product information via research reports and digital news channels. For more information, please visit: www.hktdc.com/aboutus. Follow us on Twitter @hktdc and LinkedIn

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