Our comprehensive assessment of Hong Kong's operating environment and the outlook for its leading sectors are formed by bringing together a wealth of data on global markets that affect Hong Kong, as well as the latest industry developments that could impact Hong Kong's industries. This unique integrated approach has given us an impeccable track-record for predicting important shifts in the markets, ensuring you’re aware of the latest market opportunities and risks in Hong Kong before your competitors.

Country Risk

Hong Kong Country Risk

BMI View:

Hong Kong

Core Views

  • Hong Kong's economy slowed yet again in Q214, with real GDP growth coming in at a disappointing 1.8% year-on-year (y-o-y). Owing to dual headwinds from China as well as the teetering domestic property market, we maintain our 2014 and 2015 real GDP forecasts to 2.5% and 3.3% . The ongoing political protests in Hong Kong carry downside risks for our 2014 growth forecast, as commerce has been hit during the most acute phases of public participation. In particular, tourism earnings are set to suffer significantly, as Chinese tourists are discouraged from visiting the city-state.

  • We continue to expect the nascent correction in Hong Kong property...

To read the full article Register for Free or Login

Hong Kong Operational Risk Coverage (9)

Hong Kong Operational Risk

BMI View:

BMI View :  Hong Kong is a very low risk country with no single, significant deterrent to foreign investors. Its overall Operational Risk score is boosted by a number of factors, namely its large, skilled labour force, developed logistics network, open economy with relatively low fiscal and trade barriers and minimal red tape, as well as its low crime rate. That said, long- term risks do threaten Hong Kong's logistics network , such as the country's constantly rising population, which increases the pressure on the transport infrastructure and utilities supply, and the increasing competitiveness of mainland Chinese ports . Hong Kong...

To read the full article Register for Free or Login

Hong Kong Crime & Security

BMI View:

Overall, crime and security risks for investors and businesses in Hong Kong are very low with regards to all types of risks (crime, terrorism, interstate conflict) due to low crime rates, the absence of domestic terror groups/attacks and an effective security/counter-terrorism apparatus, as well as a secure neighbourhood under the security patronage of military heavyweight China. Thus we have awarded Hong Kong a total score of 90.9 out of 100 in our Crime and Security Index, ranking Hong Kong among the most secure countries/territories in the world, six places behind global leader Slovenia, outperforming all other regional peers in Asia.

In comparison, the greatest risks for companies and the general public in Hong Kong relate to the global terrorism threat that affects Hong Kong as global financial hub and capitalist engine of China. Terrorism threats in China are related to the Muslim Uighur minority in the north-western region of Xinjiang...

To read the full article Register for Free or Login

Hong Kong Labour Market

BMI View:

BMI View: A large labour force of more than 5mn and a steady supply of migrant workers from China and other Asian states ensure a high availability of cheap and flexible labour in Hong Kong. Authorities are keen to keep government intervention in the labour market to the bare minimum to preserve Hong Kong's status as an employer-friendly business hub. However, some sectors, such as construction and information technology, will face skilled labour shortages owing to inadequate education in technical vocational schools and too much government spending on the tertiary education sector. Nevertheless, Hong Kong is a high performer in our Labour Market Risk Index , scoring 77. 2   out of 100 and placing second globally, just behind the United States.

...

To read the full article Register for Free or Login

Hong Kong Logistics

BMI View:

Hong Kong is a clear outperformer with regard to Logistics Risks. Its very well-developed transport system with top-rated road, rail, port and airport infrastructure, its easy trade procedures and strong governance leading to extremely low import and export lead times and documentation as well as high freight capacities by sea and air combine to put it in first place out of 30 countries in the region and in second globally after the Netherlands. The only category in which Hong Kong scores comparatively poorly is Market Size and Utilities, since Hong Kong has no natural resources of its own and is thus forced to import resources.

The Transport Network in Hong Kong is very sophisticated, ranking in third place regionally and in 16 th position out of 170 countries in the world, which is many places in front of mainland China. The need to develop very smart and efficient transport infrastructure, both in terms of extent and quality,...

To read the full article Register for Free or Login

Hong Kong Trade & Investment

BMI View:

Hong Kong presents minimal trade and investment risks owing to its relatively open economy and attractive foreign investment policy. Specifically, investors are exposed to reduced costs due to a transparent legal system, limited corruption and strong contract enforceability. These risks are further mitigated by favourable tax rates and attractive financial incentives. Overall, Hong Kong is the regional outperformer in the BMI Trade and Investment Risk Index with a score of 82.4 out of 100, outperforming fellow financial hub Singapore, which places second in the Asian rankings.

Hong Kong is an open country for economic activity due to its market-oriented economy and superior financial market development. The government offers financial incentives for foreign investors in the shape of tax breaks, and government assistance, which boosts its attractiveness. In addition, foreign entities are able to access credit in Hong...

To read the full article Register for Free or Login

Hong Kong Industry Coverage (18)

Autos

Hong Kong Autos

BMI View:

According to the Hong Kong Department of Transport (HKDT), vehicle sales for 7M14 came in at 26,449 units, an increase of 8.1% y-o-y. This figure consists of new private car registrations, new goods vehicle registrations and new private light bus registrations.

Previously, our view has been that subsidies provided by the government to encourage commercial vehicle (CV) owners to replace their pre-Euro IV vehicles are unlikely to have a significant impact on the CV segment, due to affordability issues. The Hong Kong government aims to replace roughly 80,000 pre-Euro IV CVs (including franchised buses) by 2019, which will entail average CV sales of over 14,000 units annually from now until 2019.

However, given the more heavy handed approach that the government is now taking via the 'Ex-Gratia Payment' scheme, we foresee that CV sales will increase as vehicle owners look to replace their pre-Euro IV. Since the scheme was...

To read the full article Register for Free or Login

Commercial Banking

Hong Kong Commercial Banking

BMI View:

...
Commercial Banking Sector Indicators 
Date Total assets Client loans Bond portfolio Other Liabilities and capital Capital Client deposits

To read the full article Register for Free or Login

Consumer Electronics

Hong Kong Consumer Electronics

BMI View:

BMI View: H igh incomes and   a tech literate population combine to ensure demand for the latest devices remains strong in Hong Kong , helping to compensate for the diminished first time buyer opportunities in all three segments as a result of high penetration rates .   S pending growth on consumer electronics devices slowed in 2012 and 2013 due to a combination of a weaker economic environment, price erosion and high penetration of devices in key markets , but t he outlook for 2014 is stronger . W e expect growth to accelerate as high consumer confidence and  ...

To read the full article Register for Free or Login

Food & Drink

Hong Kong Food & Drink

BMI View:

BMI View : C onsumer goods segments in Hong Kong have been relatively well developed for some time, and given the country's population of 7.15mn, investment opportunities in the food and drink market are scarce. Additionally, the economy continues to struggle following the recession of 2008-20 09, with GDP growth slowing significantly to around 2% in 2012-2013 ; this is weighing on consumption of non-essential goods and investment. Generally speaking, most food and drink segments are highly mature, although consumers remain interested in novelty and convenience, which still provides opportunities for food and drink...

To read the full article Register for Free or Login

Freight Transport

Hong Kong Freight Transport

BMI View:

Following a year of increasing volumes in all freight modes but one, 2014 will signal further mixed growth dynamics across Hong Kong's freight transport sector and new historic high freight volume levels in a number of the modes.

US demand is set to continue recovering in 2014, while eurozone we believe will only return to the path of recovery. Development in both major economies will have a positive effect on throughput at Hong Kong's port, which caters as a container shipping hub for Asia, and also the country's air freight volumes, with Hong Kong boasting the busiest cargo airport globally.

The port of Hong Kong is forecast to demonstrate growth both in tonnage and box throughput in 2014, after its performance was hindered by a forty day strike at the port in 2013. Although up until 2012 it was managing to weather the competition from the development of Shenzhen as China's second largest container port and despite...

To read the full article Register for Free or Login

Information Technology

Hong Kong Information Technology

BMI View:

BMI View:   W hile a lucrative market, the maturity of Hong Kong's IT market means growth rates will underperform emerging markets in the A sia P acific region. However , we believe it s position as a regional data   centre and cloud services hub will sustain growth rates above those observed in the majority of developed markets globally . ...

To read the full article Register for Free or Login

Infrastructure

Hong Kong Infrastructure

BMI View:

BMI View: The delays with several public projects suggest that their uncompleted construction works could spill over to 2014 and 2015, boosting construction and infrastructure growth rates during these years. That said, we do not believe that this boost is sufficient to bring 2014-15 growth to levels seen in previous years due to the problem with labour shortages and the threat of a Chinese economic slowdown.

Key Trends And Developments

  • We remain optimistic about Hong Kong's residential and non-residential building construction sector over the medium term (2014-2018). We forecast Hong Kong's residential and non-residential building sector to experience growth of around 2.7% in 2014 before moderating to 1.3% between 2015 and 2018.

  • We forecast full-year real growth for Hong Kong's construction sector to...

To read the full article Register for Free or Login

Insurance

Hong Kong Insurance

BMI View:

BMI View: In recent years, successful marketing campaigns by the many global life insurance companies have produced a surge in new business (and total) premiums despite Hong Kong's life insurance segment being very well developed. Life insurers have developed offerings which, compared with alternatives such as cash and equities appear very attractive. There has also been significant increase in interest from mainland China residents in products offered by Hong Kong life insurers. These factors, coupled with Hong Kong's positive macroeconomic outlook support our view that we will see consistently strong growth over the coming years.

As of late-2014 we are expecting growth in premiums to come in at around 10% for both the life and non-life sector. Many of the leading non-life companies have registered near double-digit growth in premiums over the last few quarters due to higher prices for...

To read the full article Register for Free or Login

Medical Devices

Hong Kong Medical Devices

BMI View:

Espicom Industry View:   The Hong Kong medical device market has experienced strong growth in recent years and this is expected to continue over the forecast period, with the highest growth projecte d for the patient aids sector. Imports of medical devices to Hong Kong are high, especially for such a small market. The bulk of imports tend to be more expensive advanced medical equipment, much of which is re-exported with only a small proportion intended for domestic use. Although its status as a trade hub may be compromised slightly as the proportion of export-related service provision wanes and China becomes more accessible to trade, Hong Kong continues to be an important gateway to the West.

Headline Industry Forecasts

  • Despite being small in...

To read the full article Register for Free or Login

Oil & Gas

Hong Kong Oil & Gas

BMI View:

BMI View:   With  no domestic energy resources, Hong Kong faces the challenge of meeting growing oil and gas demand through imports alone.   While Hong Kong can ostensibly fall back on China in order to fulfil its energy needs, there is some resistance to an overreliance on its parent state from both private and public entities. Nevertheless, it is increasingly likely that Hong Kong will turn to the mainland as it looks to curb its own reliance on thermal energy over the coming years.

...
Headline Forecasts (Hong Kong 2012-2018)
  2012e 2013e

To read the full article Register for Free or Login

Pharmaceuticals & Healthcare

Hong Kong Pharmaceuticals & Healthcare

BMI View:

BMI View: Although the ongoing political uncertainty will affect business environment, we highlight that Hong Kong will remain as an attractive market for pharmaceutical companies over the longer term owing to rising healthcare demands from its ageing population.

Headline Expenditure Projections

  • Pharmaceuticals : HKD11.24bn (USD1.45bn) in 2013 to HKD12.12bn (USD1.55bn) in 2014; +7.4% in local currency terms and 7.2% in US dollar terms. Forecast unchanged from Q414.

  • Healthcare: HKD122.00bn (USD15.73bn) in 2013 to HKD130.60bn (USD16.81bn) in 2014; +7.0% in local currency terms and 6.9% US dollar terms.  Forecast broadly in line with Q414.

...

To read the full article Register for Free or Login

Power

Hong Kong Power

BMI View:

BMI View: Thermal energy continues to account for the almost all of Hong Kong's domestic energy production; while there have been some tentative steps towards generating energy from renewable sources, these have been few and far between. Closer energy links with China raise questions about how best to reconcile Hong Kong's reliable energy service with China's more volatile market.

BMI forecasts that real Hong Kong's GDP growth will average 3.4% a year between 2012 and 2022, with an increase of 5.0% estimated for 2011. BMI is forecasting an average annual increase of 2.23% to 41.07TWh between 2013 and 2017. Thermal generation, comprising coal, gas and oil, is expected to grow by an average of 2.08% per annum over the same period, and average 2.57% between 2018 and 2022. Thermal power generation will continue to account for all of domestic...

To read the full article Register for Free or Login

Real Estate

Hong Kong Real Estate

BMI View:

BMI View: Hong Kong remains one of the most dynamic commercial real estate markets in the world , with high rents and intense competition for office, retail and industrial sp ace. 2014 has brought some much- needed stability to the market as the economy recov ers from the financial downturn; however, demand levels will remain vulnerable to the slowdown in mainland China going into 2015.  

With a focus on Hong Kong's commercial office, retail and industrial sectors, the Q4 2014 Hong Kong Real Estate Report covers rental market performance in terms of rates and yields over the past few years, as well as providing rental rate and net yield forecasts to 2018. BMI's in-depth analysis for each of these segments...

To read the full article Register for Free or Login

Retail

Hong Kong Retail

BMI View:

BMI View:   Hong Kong's sophisticated retail market faces challenging times as pro-democracy protests extend into key retail districts and impact on sales. The Ebola health alert is also causing concern, with retailers fearing that air travel - and therefore travel retail spending - will be adversely affected. However, the underlying trend is for increased spending on non-essential items over the next few years, leading to continued expansion of the retail sector. We are particularly bullish about the future growth prospects for personal care & insurance spending, which we expect to continue to constitute the highest proportion of overall household expenditure throughout our forecast period. We also forecast robust growth in spending on alcoholic drinks & tobacco over our review period, with...

To read the full article Register for Free or Login

Shipping

Hong Kong Shipping

BMI View:

The port of Hong Kong holds the top position in Hong Kong's maritime sector in terms of both total tonnage and container throughput. According to BMI's forecasts, the port will demonstrate growth in 2014 after its 2013 performance was hindered by a forty day strike, recession in the eurozone, the sluggish nature of US economic growth, the slowing outlook for the Chinese economy, the move of Chinese factories further inland and competition from the neighbouring port of Shenzhen.

Over the rest of the medium term, BMI projects further growth at the port of Hong Kong. Although up until 2012 it was managing to weather the competition from the development of Shenzhen as China's second largest container port and despite the close proximity of the two facilities was managing to retain its lead, Hong Kong is now lost it to Shenzhen, which, BMI believes, also had its container...

To read the full article Register for Free or Login

Telecommunications

Hong Kong Telecommunications

BMI View:

BMI View: Data usage is expected to be one of the key drivers for H ong Kong's telecoms sector over the next few years. The Hong Kong government is actively promoting the territory as a regional hub for data centres, and BMI believes Hong Kong has the right characteristics to attract data centre investments, given its safe business environment, reliable power supply and highly educated workforce. Telecoms operators benefit from the usage of their network infrastructure when demand for data centres increase. For the mobile sector, operators are looking to upgrade users to higher value 3G/4G service plans to offset the loss of voice and SMS revenues to free messaging applications.

Key Data

  • Mobile...

To read the full article Register for Free or Login

Tourism

Hong Kong Tourism

BMI View:

BMI's tourism report looks at a range of market indicators in this very well-established tourism industry, including inbound and outbound travel, tourism-related expenditure, hotel developments and overall industry rate. With some of the highest outbound travel rates in the world and very positive inbound arrivals figures, the future is looking very positive for this popular destination at the heart of the Asia Pacific region.

Hong Kong has long been a popular global tourist destination, acting as a transit hub between many international destinations. Asia Pacific countries dominate Hong Kong's inbound arrivals market, in particular China, which sends millions of visitors (many daily visitors) each year. Arrivals from China are vital to the health of the tourism industry, and we are unlikely to see recent protests urging the introduction of arrivals quotas gain any traction. The Hong Kong tourism board estimates that...

To read the full article Register for Free or Login

Water

Hong Kong Water

BMI View:

BMI View:   We have expanded our forecasts to include domestic freshwater resources (largely rainwater collected in reservoirs), desalination production (predominantly used for flushing purposes), and domestic water extraction, total consumption as well as mains consumption, and water losses.

It is our opinion that most of the opportunities in Hong Kong's energy and utilities sector lie with the water utilities sector. The Hong Kong government is becoming increasingly concerned about water scarcity and is looking to explore new water sources so as to ensure a sustainable supply for Hong Kong.

Hong Kong is heavily reliant on the Guangdong imports for the majority of its freshwater consumption, with desalination being largely reserved for flushing, and water recycling resources predominantly being allocated to industrial users. Imported waters from...

To read the full article Register for Free or Login