The HKTDC Export Index 1Q19, for the first quarter of 2019, rebounded four points from the previous quarter to 39.2,
indicating that confidence among exporters is growing across all sectors and markets.
"Progress in the trade talks between Mainland China and the United States has led to an improved sentiment. However, it
is still expected the dispute will not be resolved imminently, so we are calling on local exporters to expand their
business into new markets such as the Russian Far East and ASEAN countries," HKTDC Director of Research Nicholas Kwan
said at a press conference today.
The HKTDC Export Index gauges near-term export prospects. Readings above and below 50 indicate positive and negative
sentiment respectively. Mr Kwan noted that the indices remained below the watershed mark of 50, but expansion has been
satisfactory, especially in the toys sector and European Union market, which rose 17.1 and 5.6 points respectively.
"Our forecast for export growth in 2019 remains unchanged - an increase of 5% in value and 3% in volume," Mr Kwan said,
adding that machinery is the most promising export sector, with a score of 42.2 points, followed by toys (41.4) and
electronics (39.7). In terms of specific export markets, Japan (48) and the EU (47.4) enjoyed the most positive
short-term market outlook, followed by the United States (46.1) and Mainland China (45.7).
Smaller orders from US buyers
HKTDC Economist Doris Fung said Hong Kong exporters were slightly more optimistic than before on the outcome of the
Sino-US Trade dispute. Fewer respondents - 51.7%, compared with 54.4% in the last quarter - were concerned that it might
adversely affect their export performance over the near term.
But despite the increase in optimism, almost half of the respondents (48.5%) reported they had already experienced a
negative impact related to the trade dispute, particularly in relation to reduced order sizes (69%). Other impacts
include price bargaining (34.9%), cancelled orders (22.7%) and sharing or bearing part of the tariff costs (16.2%).
Responding to the trade friction, over half of the respondents (54.1%) said they had considered developing markets
outside the US. Other plans included moving the production or sourcing base (27.4%) and downsizing the company (19.9%).
Russian Far East: an alternative manufacturing base
HKTDC Assistant Principal Economist (Global Research) Louis Chan said that with its rich natural resources, abundant
land, upgraded infrastructure, unfettered access to the markets of the Eurasian Economic Union (EAEU) and the
availability of generous tax incentives, the Russian Far East District - also known as the Far Eastern Federal District
(FEFD) - is an attractive destination for manufacturing investment.
"The FEFD is an especially suitable market for Hong Kong traders who are operating in the food processing, paper and
pulp, rubber and plastics, electrical equipment, medicine and jewellery industries," Mr Chan said.
Over the past five years, the FEFD has set up a ministry and four government agencies to accelerate infrastructure
improvement and increase industrial capability in the region. One of the most important initiatives is the establishment
of the Far East Development Corporation (FEDC) which oversees 18 Advanced Special Economic Zones (ASEZs) and 22 Free
Ports of Vladivostok (FPVs) municipals.
"Amid the lingering Sino-US trade tension, the FEFD not only offers emerging manufacturing investment opportunities with
unfettered access to EAEU markets, but also alternative sources of agricultural products currently affected by US
tariffs." Mr Chan said. "For example, some Mainland China and Russian investors have already started soybean processing
in the FEFD's Amur Region and Jewish Autonomous Region to supply the mainland market."
Aquaculture and tourism potential
Mr Chan added that Hong Kong business can also consider importing a range of products from the FEFD. "The district has
access to the waters of North Pacific, which are a paradise for cold water seafood such as crabs and scallops. A range
of cosmetics and health supplements has also been developed including face masks derived from sea cucumbers and
medicinal products made using the chaga mushroom."
The FEFD is also planning to develop an entertainment zone, incorporating resorts and casinos, to boost tourism. "There
are plenty of opportunities for Hong Kong companies to participate in the development of the tourism industry in the
FEFD. In addition to investment and project management, they can also provide marketing support for the FEFD to promote
its tourism to potential Asian visitors," Mr Chan explained.
Growing ASEAN e-commerce opportunities
With their young and tech-savvy populations, countries such as Thailand, Malaysia and Indonesia are seeing rapid growth
in business-to-consumer (B2C) e-commerce. "The ASEAN middle-class is increasingly familiar with shopping online or
through multi-channel platforms for travel and leisure, fashion and entertainment, as well as consumer electronics,
health, beauty and wellness products and services, and their purchase decisions are heavily affected by online reviews,"
said HKTDC Economist Jacqueline Yuen.
Ms Yuen said the market is fragmented and there is keen competition among e-commerce platforms, adding that social media
is growing in popularity and is an ideal selling platform for small suppliers and new brands. She advised Hong Kong
traders to consider penetrating these markets through the omni-channels provided by department stores or speciality
shops, or the B2C platforms and social media shops.
She also mentioned the rise of "mompreneurs", women who share experiences with other new mothers at the same time as
promoting baby and maternity items. "Breastfeeding is becoming more widespread in ASEAN countries and consumers are
looking for natural, organic and chemical-free products, offering new opportunities for Hong Kong traders," Mr Yuen
For the fashion and accessories sector, she advised local companies to target young consumers who are less
brand-conscious, adding that e-tailers will source at trade shows for innovative, stylish and unique items. "Hong Kong
exporters can connect with ASEAN e-tailers by exhibiting at local trade fairs that also offer a customised
business-matching service," she said.