Hong Kong: Following Chinese trend of better external demand - ING

In view of Iris Pang, Economist at ING, there is not much to argue when it comes to the trade cycle between Mainland China and Hong Kong.

Key Quotes

“They share the same trends because on average c.52% of Hong Kong exports have gone to China over the past 10 years. We expect Hong Kong’s export growth to follow those of Mainland exports, and to decelerate in July (INGF: 10.8% YoY; consensus: 9.2%, prior: 11.1%) while imports should grow a bit faster (INGF: 11.6% YoY; consensus: 9.9%; prior: 10.4%).”

“This positive view comes in as the holiday season increases re-export activities while external demand is better than last year. In general, export and import businesses fare better during 3Q and 4Q.”

“On the downside, the tension between China and US on trade has increased, and the external trade environment of Hong Kong (as well as Mainland China) has become hazy. Will the US investigation turn into murky protectionism or a trade war? Our view is that it is very likely that China will retaliate if the US starts sanctions, or if the investigation results in a claim that China has forced US companies to “surrender technological knowhow”.”