Standard Chartered economists Tommy Wu and Hunter Chan report that the Hong Kong SME Leading Business Index fell to 43.3 in Q2, reflecting weaker sentiment linked to higher Oil prices and Middle East tensions. While the global economic outlook and raw material cost sub-indices dropped sharply, investment and hiring remained above 50, suggesting SMEs still see Hong Kong and mainland China as resilient.

SME sentiment pressured by geopolitics

"The Standard Chartered Hong Kong SME Leading Business Index (SMEI), released jointly by Standard Chartered Bank and the Hong Kong Productivity Council, fell to 43.3 in Q2 from 43.9 in Q1."

"The oil price surge and expected economic repercussions from the Middle East conflict were likely behind the sharp fall in the ‘global economic outlook’ (-15.5pts) and ‘raw materials’ cost (-10.4pts) sub-indices."

"Meanwhile, the ‘investment’ sub-index rose (1.4pts) while ‘number of staff’ was steady (-0.1pt), pointing to a stable labour market; both were above 50."

"This probably reflects SMEs’ confidence in Hong Kong’s economic recovery and mainland China’s economic resilience even in the face of high global uncertainty."

"That said, while both the ‘sales’ and ‘profit margin’ sub-indices improved (+1.1pts and +1.9pts, respectively), they remained below 50."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)