Access to growth capital in Hong Kong is at its most favourable for 18 months, but confidence has been dented by fewer business opportunities, pressure on cashflow, and worrying signs from the Chinese mainland, according to new findings from the Global Economic Conditions Survey (GECS) from ACCA (the Association of Chartered Certified Accountants) and the Institute of Management Accountants (IMA).
GECS is the largest quarterly economic survey of accounting professionals in the world, gauging the views of ACCA and IMA finance professionals working at the coal face of businesses.
Half of all businesses who took part in the latest survey reported a loss of confidence, up from 40 percent in the first quarter, and 58 per cent were pessimistic about the economic recovery.
"Across the globe the survey shows the highest level of optimism about the national and global economies in two years, and the strongest year-on-year improvement in three years," says Emmanouil Schizas, ACCA's senior economic analyst and editor of GECS. "However, underneath this positive story there are significant variations, with some markets not benefiting from the buoyant global mood. Hong Kong is one of those markets."
Hong Kong has seen a period of relative improvement over the last six months leading up to Q2, but demand and cash-flow conditions have deteriorated to levels last seen one year ago. Cashflow pressures have returned and business opportunities have shrunk, even though access to growth capital has improved to levels unseen over the past 18 months.
"The good news coming from the finance teams within Hong Kong's businesses is that business capacity -- investment in both capital and staff -- has increased -- probably because a lack of external opportunities has focused businesses' attention on organic growth," says Brenda Lam, Acting Head of ACCA Hong Kong.
"However, business confidence in Hong Kong has taken a hit."
Respondents in Hong Kong have traditionally expected government spending to rise substantially in the medium-term, but are now beginning to revise their expectations downwards. Even though public spending is expected to carry on rising in Hong Kong, a slight tightening of fiscal policy in the medium term will have an impact on confidence and economic performance.
The Global Picture
On a global scale, GECS found both business confidence and optimism about the economy continued to rise during the second quarter of the year.
Nearly half of the GECS sample -- 47 percent -- felt that the state of the economy was improving or about to do so, up from 43 percent in early 2013, while just under 50 percent were pessimistic, predicting deterioration or stagnation, down from 54 percent in the first quarter. This is the highest level of optimism about the national and global economies in two years, and the strongest year-on-year improvement in three years.
The survey showed there was improved availability of growth capital on a global scale in the second quarter of 2013, which was driving confidence upwards.
Fewer respondents reported falling revenues and declining orders. There has been little change in the share of respondents worried about customers or suppliers failing, despite the tightening of cashflow conditions.
The second quarter also saw businesses reporting more investment and business opportunities being available particularly through investment in new markets, niche offerings, and high quality standards. A two year high of more than 26 percent reported that their organisations had access to value-added opportunities and were not considering cost-cutting.
"What is encouraging is that the marginal improvement in global business dynamism in early 2013 has now accelerated across all measures of investment, orders and employment. Employment in particular is recovering quickly and is now stronger than at any point in the last two years," says Schizas.