Despite the unfavorable economic conditions in the US, Hong Kong's export growth reported a better-than-expected 11.5 percent growth, year-on-year, in the first four months of this year.

But the Hong Kong Trade Development Council (HKTDC) is wary about the second-half outlook, predicting the 2008 export growth could stand modestly at 7 percent amid the lingering impact of the US-led global slowdown.

"The 11.5 percent growth exceeds our expectations," said Edward Leung, chief economist for the HKTDC. He attributed the export rise to sizzling intra-Asia trade and sustained demand from Europe.

Leung said the intra-Asia trade became the main engine for the growth, especially for the mainland.

Electronic exports constituted half of the total, recording a double-digit increase throughout April. Leung attributed the rise to the increased shipment of electronics from regional countries to the mainland for assembly.

In addition, the re-exporting to the mainland of mainland-originated goods saw a 17 percent growth due to the increasing use of Hong Kong as a regional distribution center.

Exports to the European Union, India and the mainland rose 9 percent, 107 percent and 13 percent, respectively. By comparison, goods destined to the US and Japan dropped by 1 and 2 percent.

Leung said the impact of the US economy on local exporting has yet to fully surface.

"The extent of the adversity hinges on the trend of the exchange rate of the greenback against a basket of major currencies, such as the Euro and yuan," Leung explained.

He added that the US economy is unlikely to recover in the next three to six months, during which the uncertainty will cast a shadow over Hong Kong exporting.

Leung predicted that the troubled US economy will worsen Hong Kong's export business in the third quarter, dragging the yearly growth down to 7 percent.

According to a survey conducted by the HKTDC, sentiment of manufacturers from various industries regarding the short-term export outlook was pessimistic.

The HKTDC export index - the index tracking the market climate on exports - dropped from 57.3 to 45.9 between the third quarter of 2007 and the second quarter of 2008.

"Indices of the manufacturers were all below the pass mark of 50," Leung said. "A third of the respondents felt the situation has worsened."

(HK Edition 06/11/2008 page2)