INSTANT VIEW 3-HK Oct exports fall 13.1 pct yr/yr

Published: 26 Nov 2009 01:27:22 PST

HONG KONG, Nov 26 - Hong Kong exports in October fell 13.1 percent from a year earlier by value, their worst performance in two months, but that was due to a high base effect last year, masking gradually improving conditions in the trade sector, the government said on Thursday.

The government said that in October last year, many traders had brought forward shipments for fear of subsequent cancellations as the global financial crisis deepened after the collapse of U.S. investment bank Lehman Brothers.

Exports to other Asian destinations dropped 8.7 percent from a year earlier, reversing a 1 percent year-on-year increase in September, while shipments to the United States fell 23.4 percent, against a 27.8 percent year-on-year drop in September. Exports to mainland China declined 8.9 percent and shipments to Japan fell 12.7 percent, but shipments to India rose 19.1 percent.

On a seasonally adjusted basis, however, exports in August-October rose 4 percent from the preceding three months and imports jumped 8.3 percent. **************************************************************

KEY POINTS:

Oct Sep Aug

pct* pct* pct* Exports -13.1 -8.6 -13.9 Imports -10.7 -3.1 -9.8 *Pct change on a year earlier. Seasonally adjusted (percent change on three months earlier):

Aug-Oct Jul-Sep Jun-Aug Exports 4.0 -2.2 2.6 Imports 8.3 4.9 8.3

COMMENTARY:

KEVIN LAI, SENIOR ECONOMIST, DAIWA RESEARCH INSTITUTE

"On a three-month seasonally adjusted basis, exports were up 4 percent, which is a very healthy gain so the recovery is gaining traction in my view.

"From this month, exports will hit a low base so November exports should see 0 to 1 percent growth year on year. Going into next year, in the next 3-6 months we'll see headwinds building from China, the U.S. and OECD countries. I think the recovery in demand will be there but we won't see a sharp comeback. So Hong Kong exports next year will rise 8 percent. It's a recovery but the absolute value of exports will still be below levels seen in 2008."

IRINA FAN, SENIOR ECONOMIST, HANG SENG BANK

"Exports in October rose 1.4 percent from September (not seasonally adjusted), so they improved even though they contracted year-on-year due to a rush of orders last year amid concern about cancellations resulting from the financial crisis.

"Exports are quite volatile but they are gradually improving and we expect (November) exports to turn positive year-on-year.

"Next year, industrialised economies are forecast to be back to growth, although below trend growth. So we expect Hong Kong exports to rise 8 percent in 2010, but that is modest given the sharp drop this year."

DANIEL CHAN, SENIOR INVESTMENT STRATEGIST AT DBS BANK

"The month-on-month and quarter-on-quarter export data shows some improvement. Of course, the year-on-year figures were hurt by the high base effect. Export orders haven't been that strong and shopping in the U.S. tomorrow after the Thanksgiving holiday will be a very important indicator of whether U.S. consumption is gaining momentum. If it isn't, that is going to hurt China's exports."

GOVERNMENT STATEMENT:

"Merchandise exports showed a larger year-on-year decline in October, but this was due entirely to the high base in the same month last year when many traders reportedly advanced their shipments for fear of subsequent cancellations of orders at the onset of the financial tsunami. On a seasonally adjusted basis, merchandise exports actually improved modestly in recent months.

"The external environment, whilst still subject to considerable uncertainties, has been improving gradually. If continued, this should render hopefully some support to Hong Kong's external trade in the period ahead."

MARKET REACTION:

-- Trade data was released after the stock market closed.

LINK:

-- To view the full details of trade data, see the Hong Kong government website at http://www.info.gov.hk/hkecon/key/index.htm

BACKGROUND:

-- Hong Kong posted a HK$19.2 billion ($2.5 billion) trade deficit for October.

-- Hong Kong pulled out of recession in the second quarter but a weak trade sector meant economic recovery would be slow, analysts said.

-- Hong Kong's exports and imports are predominantly re-exports to and from China. (US$=HK$7.8) (Reporting by Susan Fenton and Fion Li; Editing by Chris Lewis) (susan.fenton@thomsonreuters.com; +852 2843 6367; Reuters Messaging: susan.fenton.thomsonreuters.com@reuters.net) (