Local small- and medium-sized enterprises (SMEs) perceive a more optimistic stance toward the business environment in the first quarter of 2013, elicited by the bottoming out of the mainland economy, an SME survey conducted by Hong Kong Productivity Council (HKPC) and Standard Chartered Hong Kong has revealed.

The Standard Chartered Hong Kong SME Leading Business Index (Standard Chartered SME Index), a survey to gauge local SMEs' outlook on the overall business environment for the next quarter, rose for the second consecutive quarter to reach 49.5 for the first quarter of 2013.

The Standard Chartered SME Index was first launched in the second half of 2012 and had a reading of 42.9 and 46.3 for the third and fourth quarters of 2012, respectively.

According to the Standard Chartered SME Index, a reading above 50 indicates that the SMEs are bullish toward the business environment. The current of reading of 49.5 means they are getting more enthusiastic with their business outlook.

For industry sub-indices, both the manufacturing index (48.5) and the import/export trade and wholesale industries index (48.6) show improvement, though their overall business outlook remains pessimistic for this quarter. Retailers hold a brighter view as the retail industry sub-index has reached 51.9 - the first time it has risen above 50.

"Local retail SMEs, particularly, can benefit from the growth in sales of daily necessities in the city. That's why they are bullish toward the immediate business environment although 53.6 percent of the respondents were worried that rental levels in the city will soar." HKPC Director (Business Innovation) Leo Lam said on Thursday.

"We can assert that local SME retailers are cautiously optimistic toward the immediate business environment, but it is not a complete turn toward optimism," he said.

On the manufacturing and trade sectors, Lam reckoned that the destocking process of enterprises has also exerted a positive impact on eliciting more business orders for local SME manufacturers and trading companies.

Kevin Lau, senior economist at Standard Chartered Hong Kong, said the apparent bottoming out of the mainland economy has further convinced SMEs that an economic recovery is underway.

"Mainland economic data in the last two quarters showed that the domestic economy is stabilizing and is poised to recover so that the country's economic growth can achieve 7.5 percent in 2013.

"The mainland's economic recovery still relies on a fixed investment-led approach, but the country is showing efforts to redirect economic growth toward more domestic consumption-oriented that will create more business opportunities for local SMEs," he said.

However, Lau warned that global economic recovery in 2013 is not without risks, as the US debt ceiling issue and a fragile European economy will still probably take a toll on the global economic recovery process.

The Standard Chartered SME Index, compiled by the HKPC, interviewed 810 SME senior executives in eight industry sectors last month. The sectors included manufacturing, import/export trade and wholesale, retail, accommodation and catering services, information and communication, finance and insurance industry, professional services and real estate.

oswald@chinadailyhk.com

(HK Edition 01/11/2013 page2)