People walk past a vacant retail shop in Hong Kong early this month. Many small businesses have folded since the city entered economic recession late last year. Bloomberg News

HONG KONG: Bankruptcy petitions filed by individual debtors in the city jumped 89 percent in June from a year ago as the negative impact of the global recession continued to feed through the labor market.

The number of bankruptcy petitions in June was also 14 percent higher than the figure for May, quashing hopes that the economy may be heading for a recovery soon.

The year-on-year rise in June marked a giant leap from the figure in May when bankruptcies climbed 54 percent year-on-year.

A total of 1,619 individuals filed for bankruptcy in June, up from 857 a year ago, according to data released by the Official Receiver's Office yesterday.

Meanwhile, bankruptcy orders issued by the courts totaled 1,643 in June, up 88 percent year-on-year.

The filing of a bankruptcy petition is the first step for a financially-stressed individual to be declared bankrupt while a bankruptcy order by a court is an official declaration of a bankrupt case.

For the first six months, bankruptcy petitions totaled 9,164, up 72.9 percent from 5,299 in the same period last year.

Analysts are divided on the outlook for the territory's bankruptcy situation in the coming months.

"The number of bankruptcies will likely continue to be on an upward trend as the unemployment rate has yet to peak out," said Irina Fan, a senior economist at Hang Seng Bank, noting the continuous deterioration of the real economy.

The city's jobless rate hit a high of 5.3 percent in June after rising continuously from a trough of 3.2 percent last summer before the onset of the global financial crisis and the consequent economic recession.

The local economy also slipped into recession late last year.

Fan expects the jobless rate to peak out around the end of this year above 7 percent.

"The rate will continue to hover around a relatively high level even if it peaks out by then," she said.

"As long as the jobless rate stays high, the number of bankruptcies will not decline steeply."

Kevin Lai, a senior economist at Daiwa Institute Research, is much more optimistic about the outlook for the employment and bankruptcy situation.

"Both of the jobless rate and the number of bankruptcies should have neared a peak as the crisis has ended," he said. "Both numbers are lagging data."

Compulsory winding-up petitions against limited companies in June stood at 72, up 14.3 percent year-on-year and up 4.3 percent from May.

The month also saw 34 winding-up orders against companies, up 48.3 percent over a year earlier and up 17.2 percent from the previous month.

(HK Edition 07/18/2009 page2)