Virus Hits Hong Kong Business Sentiment Even Harder Than Protests

(C) Reuters. Virus Hits Hong Kong Business Sentiment Even Harder Than Protests

(Bloomberg) — Hong Kong’s small business sentiment plunged to a record low in February, falling through the previous trough reached during months of violent unrest last year, as the coronavirus outbreak proves to be an even stronger headwind to consumption.

The overall current sentiment reading for the city’s small and medium-sized enterprises slumped to 20.3 in February, the lowest in recorded data, according to the Hong Kong Census and Statistics Department. Sentiment among retailers collapsed to 16.6, also a record. Publication of the gauges began in 2011.

The latest readings are well under the previous lows set in August at the height of anti-government street protests that drove the city into recession. While the outbreak of the coronavirus epidemic has put a halt to mass demonstrations, it’s become a bigger setback for the city’s businesses. Even as Hong Kong’s new cases of infection slow, the outbreak is accelerating globally in western countries, disrupting global supply chains and threatening to wipe more than $1 trillion from aggregate global gross domestic product.

The outbreak of Covid-19, the name of the disease caused by the coronavirus, resulted in “across-the-board downturn in business activities,” according to the government report released Tuesday.

Any recovery in Hong Kong’s economy after half a year of political unrest now looks unlikely as visitor arrivals from the mainland have collapsed and locals are staying home, this time to avoid infection. The sentiment indicator had reached 44.1 in January during a three-month rally following a relative lull in the ongoing protests.

A shock plunge in the price of oil this week affected asset values around the world, pointing to an increasingly murky outlook for the global economy in the months to come.

In his budget presented at the end of February, Financial Secretary Paul Chan projected the city will see economic growth in the range of -1.5% to +0.5% in 2020, following an annual contraction last year that was the first in a decade. The budget included a HK$120 billion ($15.4 billion) relief package that gave a HK$10,000 handout to permanent residents aged 18 and older.

In an interview with Bloomberg Television in early March, Chan said he expects the cash handouts to start positively affecting the economy this summer, urging those who receive the cash to spend it at local businesses.

“I think people will of course depending on their own personal circumstances, support us and support Hong Kong,” Chan said.