Hong Kong’s exports stronger than expected in October, telecom exports surge

Hong Kong's total exports rose 1.1%m/m, sa in October, leaving total exports down 3.7%oya. Meanwhile imports slipped 0.1%m/m, sa, falling 8.5%oya in October. As a result, the trade deficit narrowed to HK$29.6 billion in October from HK35.2.1 billion in September. Exports of telecom products surged 8.8%m/m, sa in October while overall electronics only gained 0.3%, hinting that the tech cycle may still be alive, but narrowly based around the new mobile phone launches in 3Q. 

The risk is that unless the tech strength broadens out, the cycle may be short lived and may not benefit the region uniformly. Indeed, coinciding with the surge in telecom products, exports to Taiwan also jumped 11.7%m/m, sa in October, reflecting Taiwan's position as the tech bellwether for the region and one of the main beneficiaries of the current cycle. Meanwhile exports to other major destinations remained soft in October. 

By region, exports the G-3 countries remain choppy, and still await a lift from improving growth momentum in developed markets. Meanwhile, developments in China still remain cloudy. While China's growth is expected to slow next year, in the near term, some rotation is expected in China's growth drivers, with a modest pick up in good-producing activity and a slowdown in the service sector growth in the next 1-2 quarters. If indeed this rotation materializes, it will provide a cushion for Hong Kong's re-export activity.