HONG KONG: Business confidence among small and medium enterprises (SMEs) in Hong Kong has picked up since the fourth quarter of last year but is still the lowest in Asia, according to a survey by HSBC.

The semi-annual survey of the small business sector shows that Hong Kong's business confidence climbed 33 points to 83, the biggest rise among Asian countries in the survey. A score of 200 represents the highest confidence and 100 is the neutral level.

The score for Asia overall jumped to 107 in the second quarter this year from 92 in the fourth quarter of 2008.

Conducted in May and June 2009, the survey collected the views of more than 3,400 SMEs in 12 markets across Asia, Latin America and the Middle East.John Coverdale, HSBC's global co-head of commercial banking for Asia-Pacific and the Middle East, said SMEs in Hong Kong are positive on the business outlook as more SMEs are requesting loans to support future activity, but the city's confidence level was still the lowest in Asia.

"Hong Kong's small business sector has been impacted by the drop in global demand - more so than many developing markets in the region," Coverdale said. "But it is a very positive sign that SMEs in the territory are more optimistic in their business outlook."

He added that HSBC has also seen a rebound in SME customers asking for commercial mortgages and equipment loans in recent months, a sign that businesses are preparing for more activity.

HSBC has recently increased its SME loan fund to HK$12 billion from HK$10 billion.

Coverdale said the bank planned to lend HK$10 billion to the SMEs, with most of the successful applicants coming from the Hong Kong government's loan guarantee scheme.

"It is very important to tell small businesses that we are not just a bank for big corporates," Coverdale said in a press conference in Hong Kong yesterday.

The survey also shows that small businesses that engage in cross-border business with the mainland are the most optimistic, with 30 percent expecting growth in trade volume in the next six months.

Chairman of Hong Kong Small & Medium Enterprises General Association Chan Shan-ho said sales orders of local businesses have showed "a slight improvement" after the impact of the global financial crisis.

"The sales orders have so far bounced back by 20 percent," Chan said. "It is still quite difficult to run a business in the second half, as the economy in the US and Europe has yet to recover."

Chan also said that the threshold for applying for loans under the government scheme is quite high, making it difficult for SMEs to obtain loans from local banks.

(HK Edition 07/15/2009 page4)