Business confidence in Hong Kong picks up

Hong Kong - Business optimism of privately held enterprises in Hong Kong has rebounded in the first quarter of this year, according to the latest International Business Report (IBR) released by Grant Thornton Jingdu Tianhua. In fact, the “Percentage Balance of Optimism/Pessimism” has risen appreciably from +57% in the fourth quarter of last year to +67%.

The IBR survey also reveals that, though business confidence in developed countries in America and Europe has recovered noticeably, business confidence in emerging markets is still higher, with Chile and the Philippines leading the percentage balance ranking at +94% and +92% respectively.

Higher prices for products & services anticipated by Hong Kong businesses

According to the IBR survey, except in research and development where there is no growth in confidence, Hong Kong businesses have demonstrated increasing confidence in revenue, selling prices, employment, profitability, investment in plant and machinery, exports and investment in new buildings. They show the highest expectation for increased revenue (+70%), followed by selling prices (+47%) and employment (+45%). In particular, confidence in rising selling prices was up sharply to 47% from 18% at the end of 2010.

“Though recently the people of Hong Kong have criticised the government’s budget proposal and voiced the wish that more resources be invested on the long-term development of society, this does not mean that they are not optimistic of the future,” said Daniel Lin, managing partner of Grant Thornton Jingdu Tianhua in Hong Kong. “Rather, the results of our survey indicate that Hong Kong companies have growing confidence in their prospects. Nevertheless, the survey also reveals the intention of businesses in raising the prices of their products and services, hinting that inflation problems may remain in the future.”

Mature economies play confidence catch-up

In the first quarter of 2011, global confidence is at the highest since 2008 at +34%. The surge in optimism is mainly driven by rises in the mature economies. The G7 group of countries, for example, saw an upswing of 16% in optimism in this first quarter.

Daniel Lin commented further, “Developed countries in the west were most affected by the global financial crisis in 2008. After more than two years of economic restructuring, confidence in business outlook have recovered significantly, closing the gap in optimism with the emerging markets.”

A majority of the top 10 countries with the highest level of business optimism are emerging markets. With a balance of -58%, Japan is still the most pessimistic of all countries surveyed, though business optimism has picked up by 13% over the previous quarter.

“Japan has been hit by the worst earthquake and tsunami in its history and is facing infrastructure challenges. We expect there will only be a short-term financial pressure for the re-construction after this disaster because Japan is a financially strong and rich country. However, we expect Japan will still be at the end of the list in the next IBR survey, though it will not last for a long time.”