16th January 2025 – (Hong Kong) A recent survey conducted by U.S. investment bank Jefferies reveals a prevailing sense of caution among large enterprises regarding Hong Kong’s short-term economic prospects. The study, which involved 15 publicly listed companies with a combined market capitalisation of approximately HK$1 trillion, found that only 36% of respondents expressed optimism about their business outlook over the next 12 months. The average projected revenue growth for this year stands at a modest 3.2%, with retail and property sectors exhibiting even greater pessimism, anticipating growth rates of just 2.6% and 0.9%, respectively.
With the Hong Kong dollar pegged to the U.S. dollar, local authorities are unable to utilise monetary policy to stimulate the economy. Instead, Jefferies pointed out that businesses are more hopeful for a relaxation of immigration and regulatory policies rather than direct financial support.
The report notes that the fiscal space for stimulating the economy is “extremely limited,” especially in light of the upcoming policy address expected at the end of the month. Given that low taxation is a core competitive advantage for Hong Kong, the focus is likely to shift towards cost management. This may involve raising the age threshold for public transport subsidies back to 65, pausing salary increases for public sector employees, and reviving the sale of public housing to mobilise assets.
Despite 86% of surveyed companies expressing optimism about their outlook over the next three years, with retail and consumer sectors forecasting a growth of 4.5%, the most significant long-term growth opportunities are perceived to be in wealth management. This sentiment is considerably stronger than the interest in emerging sectors such as retail and tourism.
Jefferies also highlighted concerns regarding the shrinking profit margins in retail, which have led to increased vacancy rates and rental pressures. The survey indicated that half of the retail and consumer enterprises expect a “slight decline” in performance this year, a figure that surpasses many other industries. Additionally, 17% of participants anticipated reducing their workforce by 1% to 5%, with retail, consumer, financial, and fintech firms reporting higher percentages of potential job cuts.
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