Market Report, "Hong Kong Business Forecast Report Q1 2015", published

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 prices to continue over the course of 2015. However, the correction is likely to be relatively mild, with price declines in the range of 10-15% within the realm of possibility. Some upside risk to this forecast will remain in play as long as the city-state's supply-side woes, although the rising likelihood of monetary tightening in the US in 2015 is clouding the medium-term outlook.
* While Hong Kong's fiscal position remains on a sound footing, the potential for a normalisation of interest rates in the US could pose a challenge to the government. On the one hand, government revenues will be hit by the subsequent fall in property prices in the city-state. As cooling measures are withdrawn, this will also hit revenues. However, we expect such measures to remain in place for the time being, and see Hong Kong running a small fiscal surplus in 2015.
* The ongoing stand-off between pro-democracy protestors and the Hong Kong government is unlikely to yield any substantive results in terms of policy-making. Chief Executive CY Leung's government is not in favour of significant democratic reform, and Beijing's mandate over Hong Kong's political system will only continue to grow over the coming years.

Full Report Details at
- http://www.fastmr.com/prod/900617_hong_kong_business_forecast_report_q1_2015.aspx?afid=301

Key Risk To Outlook

* The main downside risk to the Hong Kong economy continues to stem from...

The Hong Kong Business Forecast Report helps businesses with market assessment, strategic planning and decision making to promote growth and profitability in Hong Kong and is an essential tool for CEOs, Chairmen, Finance Directors/CFOs, Managing Directors, Marketing/Sales Directors with commercial interests in this emerging market.

An influential new analysis of Hong Kong's economic, political and financial prospects through end-2018, just published by award-winning forecasters, Business Monitor International (BMI).

Key Uses

* Forecast the pace and stability of Hong Kong's economic and industry growth through end-2018.
* Identify and evaluate adverse political and economic trends, to facilitate risk mitigation.
* Assess the critical shortcomings of the business environment that pose hidden barriers and costs to corporate profitability.

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