GBA – Businesses Brace for Trump Impact
• Q4‑2024 GBAI indices show a drop in ‘expectations’ index while ‘current performance' remains weak
• Gauge for credit conditions shows worsening bank financing costs and cash flow despite policy easing
• Thematic questions confirm the need for a continued boost from more pro‑growth policy measures
Waiting for policy easing to set in
Our GBA Business Confidence Index (GBAI), based on quarterly surveys of over 1,000 companies operating in the Guangdong‑Hong Kong‑Macau Greater Bay Area (GBA) and conducted in collaboration with the Hong Kong Trade Development Council (HKTDC), posted a second quarter of weak current business performance, which has started to weigh on the forward‑looking index.
Q4 business sentiment for ‘current performance’ stayed largely unchanged, at 50.7 vs 50.6 prior, while the corresponding ‘expectations’ index fell to 52.9 from 55.2. All but one of the eight index components contributed to the latter’s setback to a two‑year low, possibly capturing early reactions to Trump’s re‑election and newly heightened worries over tariff hikes and worsening US‑China tensions. However, a breakdown showed that the deterioration in sentiment extended beyond externally oriented sectors. For example, by city, Hong Kong and Shenzhen saw a material weakening in their ‘retail and wholesale’ sub‑indices. Our finance and tech respondents showed the highest scores among sectors.
In terms of credit conditions, both the current and expectations indices fell to their lowest levels since Q3‑2022. In addition to a continued rise in ‘bank financing costs’, respondents’ ‘surplus cash’ and ‘receivables turnover’ worsened, further confirming the challenging business conditions. The ramp‑up in monetary easing efforts since late September has yet to lift credit expectations, but our thematic questions reflected moderating concerns over financing costs and credit access due to policy‑makers’ progrowth policy pivot, while respondents cited deflation and employment as top concerns. We think further stimulus could prolong the policy tailwind in the coming quarters, providing the key to an eventual rebound in GBA business sentiment.
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