Hong Kong's economic health has continued to contract for the eighth month in a row as the drag from a slowdown in the mainland economy intensified.

The widely-watched Hong Kong Purchasing Managers' Index (PMI) from Nikkei and Markit, which measures private-sector and manufacturing activity, stayed below the no-change 50 mark at 46.6 last month - unchanged from October's readings and signaling continued deterioration in the city's business conditions amid the mainland's faltering growth and the fragile global economy.

Weaker client demand on the mainland was a key factor weighing on overall new work, with new order intakes from the mainland to Hong Kong falling at the sharpest rate since December 2008, with the exception of September 2015, says the report.

"Hong Kong's private sector remained stuck in a downturn in November, with output and new orders continuing to decline at marked rates. New business from the mainland contracted for the 16th consecutive month at a sharper rate, while purchasing activity fell at the second-steepest pace since early-2009," said Annabel Fiddes, economist at Markit.

Fiddes noted the reduced purchasing activity suggests that companies, which are found to shrink their output in the eighth straight month in November, are increasingly pessimistic towards future output projections, at least in the near term.

The continued decline in the city's private sector has taken its toll on the local labor market, as some 4 percent of surveyed companies trimmed their payroll numbers in November, extending the current sequence of job shedding to 20 months.

Hong Kong remains one of the mainland's biggest trading partners, helping the nation link up with worldwide businesses. Many local firms have investments on the mainland, while large mainland corporations have major operations in the city.

The SAR's private sector has long pinned its hopes on the strong demand backed up by tourism expenditure and retail sales. But that hope is fading fast as the tourism and retail sectors are feeling the pinch with shrinking visitor arrivals, said Paul Tang Sai-on, chief economist at Bank of East Asia.

Fiddes warned of a murky outlook for the city's private sector. "As global economic conditions remain fragile amid slower growth on the mainland, it appears unlikely that Hong Kong's private sector will see a growth recovery until demand conditions improve," he said.

"On the back of a strong Hong Kong dollar, a local real-estate market beset by a growing property bubble risk and a sluggish retail sector, I could hardly see any obvious growth driver for Hong Kong's economy next year," said Patrick Ho, Hong Kong-based UBS Wealth Management's deputy head of equity for Asia Pacific.

He said the local equities market is likely to be more volatile and hard to make a difference in 2016.

The Swiss bank forecast that Hong Kong's economic growth this year could hover at 2 percent, well below the 2.4-percent official projection, while projecting the city's growth could slow to just 1 percent next year - the lowest level since the 2008 global financial crisis.

Hong Kong stocks edged down following the release of the latest PMI report, with the benchmark Hang Seng Index slipping 0.28 percent to close at 22,417.01 on Thursday.

sophia@chinadailyhk.com

(HK Edition 12/04/2015 page8)