HKTDC Director of Research Nicholas Kwan said Hong Kong's total exports grew 9.8% year on year to HK$3,455.8 billion in the first 10 months of 2018, driven by strong global demand and some exporters' arrangements for early shipments to pre-empt tariff implementation. Exports to emerging markets showed more impressive growth, including emerging markets in Europe (+34%), Latin America (+16%) and Africa (+16%).

"The global economy could see increasing uncertainty and slower growth in the year to come," Mr Kwan said. "However, there have been some positive developments recently - progress made in the Sino-US trade negotiations, for example, and the way Hong Kong exporters have proactively found ways to offset the impact of the trade friction - that make us cautiously optimistic regarding the prospects for Hong Kong's export performance."

Growth Forecast for Hong Kong Exports
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                                 Value    Volume    Unit value change
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2018 (estimate)                  +9.0%     +6.4%                +2.6%
2019 (forecast)                  +5.0%     +3.0%                +2.0%
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The HKTDC Export Index monitors the current export performance of Hong Kong traders and gauges their near-term prospects. Readings above and below 50 indicate positive and negative sentiment, respectively. HKTDC Assistant Principal Economist (Greater China) Alice Tsang said the reading for the final quarter of 2018 edged down slightly by 0.6 points to 35.2, following the largest quarterly drop recorded in the previous quarter (down 18.3 points to 35.8). "The flattening of the decline shows that exporters' negative emotions have not further deteriorated amid the ongoing Sino-US trade friction," Ms Tsang said.

Hong Kong exporters remain cautious in the short-term, with all industry sub-indexes staying below 50 - that is, in contractionary territory - in the fourth quarter. Electronics, which accounts for nearly 70% of Hong Kong's exports, showed a small rebound from 35.4 to 35.9 but the readings for all other industry sub-indexes declined. A number of categories showed steeper-than-average declines, including toys (43.6, down 24.3 points), timepieces (34, down 9.5 points) and jewellery (30.5, down 8 points).

Confidence in all markets stayed below 50 this quarter. Exporters were most confident about the Japan market (47.3), with the Mainland China (44.7) and European Union (41.8) markets ranking second and third respectively. The US ranked last, although its reading edged up from 39.8 to 41.5.

The Impact of Sino-US Trade Friction

Tariffs imposed by the US and Mainland China this year gradually began to have an impact on local businesses. Ms Tsang said: "In the fourth quarter, around 47% of respondents believed the trade dispute had adversely affected their export businesses, an increase of 10 percentage points from the previous quarter." She added that 66% of the respondents saw buyers ordering less, while 46% of respondents agreed that buyers were using the trade dispute as a means to bargain on price, compared with just 18% in the previous quarter.

On the other hand, Hong Kong exporters have been proactively finding ways to combat the potential negative effects of the trade dispute, with respondents more willing to engage in long-term diversification strategies. Most respondents (66%) had explored the possibility of developing markets outside the US. Other exporters were looking to enhance the competitiveness of their products (39%), or even move their production/sourcing base away from Mainland China (27%).

Strong Market Potential for IT-related Products

Local businesses hold diverse views regarding export prospects. Some 51% of exporters expect their sales to increase or remain unchanged over the coming year, while 57% believe their unit prices will increase or remain unchanged. Ms Tsang pointed out that information technology-related products, such as e-sport games and smartwatches that are compatible with electronic payment, are more likely to enjoy positive prospects. She identified some of the bright spots across different industries:

* Electronics: Robots and e-sports products are expected to be in strong demand.

* Toys: Prospects for the market hinge on whether there will be a release of new game console models in the near-term. The markets for e-sports and smartphone games are both on the rise.

* Watches and Clocks: The rapid development of electronic payment could further boost global demand for wearable tech.

* Jewellery: Demand for gold jewellery is likely to be propped up by the consumer appetite for gold in major markets such as Mainland China and India. Other jewellery, including platinum and diamonds, may also remain popular.

* Clothing: Rising operating costs, especially in Mainland China, and the continued diversification of production facilities to South and Southeast Asian countries, are likely to lead to Hong Kong's clothing exports being undercut.

ReferenceHKTDC Research website: http://research.hktdc.com/ Hong Kong Export Index 4Q18: Mounting Concerns over China-US Trade Friction: https://bit.ly/2zVvccyHong Kong Export Outlook for 2019: Cautiously Optimistic Amid Lingering Trade Tensions: https://bit.ly/2EtKKbpPhoto Download: https://bit.ly/2zVtNTr^[1][2][3][4]

PodcastHong Kong Export Outlook 2019: http://www.hktdc.com/info/podcast/v/en/en/1X04D9CX/^[5]

About HKTDC

Established in 1966, the Hong Kong Trade Development Council (HKTDC) is a statutory body dedicated to creating opportunities for Hong Kong's businesses. With 50 offices globally, including 13 on the Chinese mainland, the HKTDC promotes Hong Kong as a platform for doing business with China, Asia and the world. With more than 50 years of experience, the HKTDC organises international exhibitions, conferences and business missions to provide companies, particularly SMEs, with business opportunities on the mainland and in international markets, while providing business insights and information via trade publications, research reports and digital channels including the media room. For more information, please visit: www.hktdc.com/aboutus^[6]. Follow us on Google+, [email protected]^[7], LinkedIn.

Contact:

Angel Tang, Tel: +852 2584 4544, Email: [email protected]

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References

1. ^{^} http://research.hktdc.com/ (research.hktdc.com)
2. ^{^} https://bit.ly/2zVvccy (bit.ly)
3. ^{^} https://bit.ly/2EtKKbp (bit.ly)
4. ^{^} https://bit.ly/2zVtNTr (bit.ly)
5. ^{^} http://www.hktdc.com/info/podcast/v/en/en/1X04D9CX/ (www.hktdc.com)
6. ^{^} www.hktdc.com/aboutus (www.hktdc.com)
7. ^{^} [email protected] (www.acnnewswire.com)
8. ^{^} [email protected] (www.acnnewswire.com)
9. ^{^} [email protected] (www.acnnewswire.com)
10. ^{^} HKTDC (www.hktdc.com)
11. ^{^} Daily Finance (www.acnnewswire.com)
12. ^{^} Local Business (www.acnnewswire.com)