"Hong Kong’s export sentiment has reached a four-year high, according to the latest Hong Kong Trade Development Council (HKTDC) Export Index. For the second consecutive quarter the Index rose, climbing to 50.1 during the April-to-June period. The figure registered 47.1 in the first quarter of the year. The results are the first time since the second quarter of 2013 to surpass the 50 mark, reflecting positive sentiment among local exporters. The Export Index gauges exporter confidence, with a reading below 50 signaling a contraction in Hong Kong exports over the short-term."

Hong Kong’s export sentiment has reached a four-year high, according to the latest Hong Kong Trade Development Council (HKTDC) Export Index. For the second consecutive quarter the Index rose, climbing to 50.1 during the April-to-June period. The figure registered 47.1 in the first quarter of the year. The results are the first time since the second quarter of 2013 to surpass the 50 mark, reflecting positive sentiment among local exporters. The Export Index gauges exporter confidence, with a reading below 50 signaling a contraction in Hong Kong exports over the short-term.

However, export growth is expected to moderate in the second half of 2017 due to a higher comparison base, and could be further impacted by major downside risks, including protectionist pressures in the United States, political uncertainties in the European Union, and heightened geopolitical tensions.

Exports index to China, EU up, Japan, US declined

Among individual markets, China surpassed the United States and Japan as the most promising market for local traders. The index for the Chinese mainland market registered 51.9, with the EU up slightly at 49.6, while the index for Japan and the US declined.

Helped by a low comparison base and faster recovery of the global economy, Hong Kong's export performance has so far been above expectations, says HKTDC Principal Economist (Global Research) Daniel Poon. In the first four months of 2014, Hong Kong exports to the US rose 1.3 per cent, those to the EU were up three per cent, and those to Japan increased 5.3 per cent. While Hong Kong exporters are advised to intensify their sales efforts to capitalise on growing opportunities in the developed world, they should not overlook emerging economies, which are expected to continue to do well over the medium term.

Apparel export positive, but clouded by competition

Although China is experiencing slower growth in the midst of economic restructuring, Hong Kong exports to the mainland and ASEAN grew 10.3 per cent and 8.6 per cent respectively. Poon expected a brighter outlook for several industries for an optimistic prospects for overall exports including clothing, which is improving as a global trade environment and should stimulate sales, but prospects will be clouded by continued competition from neighbouring countries such as Vietnam, Cambodia, Myanmar and Bangladesh.

Hong Kong manufacturers looking to relocate or diversify their mainland production base should consider the Philippines as an alternative location. According to Dickson Ho, HKTDC Principal Economist (Asian and Emerging Markets), the country’s skilled workforce and burgeoning retail market offer both manufacturing and sales opportunities.

As a manufacturing base, the Philippines, enjoys a distinct edge compared with other relocation hotspots in Southeast Asia, with its English-speaking workers, who are both skilled and trainable, this presents an attractive option for foreign investors confronted with the challenge of labour management and training in alternative production bases, says Ho.

During a recent trip to Manila, HKTDC Research team found that businesses were optimistic about the country's future development. Ho says that they were generally supportive of the government's economic policy and believed President Rodrigo Duterte's strong government could better tackle the long-standing problems of red tape and bureaucracy in the Philippines.