HK CEOs’ confidence in economic growth wanes

Executives’ confidence in their revenue growth also declined

Only 62% of executives in Mainland, China and 68% in Hong Kong expressed optimism on near-term economic prospects, making them less confident than their global counterparts (77%), a study by PwC found.

There was also low optimism toward their revenue growth prospects amongst both HK and Mainland CEOs, the study said. Confidence in revenue growth amongst Hong Kong CEOs declined by 2%, and only 48% of Mainland China CEOs expressed high confidence.

Mainland Chinese CEOs cited health risks (42%) as the top threat to their respective company’s growth in the next 12 months, followed by macroeconomic volatility (41%), geopolitical uncertainties (32%), and climate change (31%).

Since the study was conducted in October and November 2021, it has yet to reflect the spread of Omicron in China, as well as the geopolitical tensions between Russia and Ukraine.

Meanwhile, Mainland China was

Thomas Leung

CEOs will need to rethink their strategic roadmap for sustainable growth

named the top market for growth amongst HK CEOs (78%) and ranked second amongst global CEOs (27%).

Mainland Chinese CEOs, for their part, are considering the US (29%), Australia (24%), Germany, and Japan (23%) as their most important overseas markets for revenue growth over the next 12 months.

In terms of priority markets for outbound investment, Mainland Chinese CEOs are targeting Asia Pacific (66%), Belt and Road countries and regions (50%), and the EU (48%) in the next 12 months, while Hong Kong CEOs plan to invest in the Asia Pacific (69%) and ASEAN markets (46%).

“In the past year, China’s economy has maintained a steady recovery trend even in the complex and severe domestic and foreign context, facing many risks and challenges. Looking into 2022, businesses can expect to face additional challenges posed by macroeconomic volatility, geopolitical tensions, cyber risks, and the increasingly urgent need to transition to a net-zero economy,” Thomas Leung, Managing Partner - Markets, PwC China said.

“Looking ahead, CEOs in Mainland China and Hong Kong will need to rethink their strategic roadmap for sustainable growth and identify longterm growth opportunities by going beyond short-term financial metrics to navigate these turbulent times and ensure sustained outcomes,” he added.

HK, CHINA AVIATION ‘FLY INTO ANOTHER YEAR OF LOSS’: JEFFERIES

In an equity research report, financial services company, Jefferies, said Hong Kong and Chinese airlines have suffered their third year of loss, with international travel delayed to the end-2022 and domestic ticket prices only marginally higher on slower economic growth.

Domestic passengers will be the main revenue driver with domestic passenger flight capacity quickly rebounding close to pre-pandemic levels once the local COVID infection outbreaks subside. However, Jefferies expects pre-fuel surcharge domestic ticket prices to increase to only 2%, given price-conscious travellers on slower economic growth.

The JEF Global strategy team noted China’s 5.5% GDP growth target seems ‘ambitious’. It is estimated that in 2022 and 2023 to return to 94% and 100% of prepandemic levels.

Jefferies also expected international travel to be delayed until the latter part of this year, at the earliest, and more likely 2023, as China is unlikely to relax its zero-tolerance COVID policy especially given the current local COVID-19 infection outlook. The international passenger capacity has been predicted at only 20% of pre-pandemic levels in 2022 and 60% in 2023. Meanwhile, cargo remains a tailwind with global air cargo sector imbalance driven by the lack of belly space from passenger planes.

Lastly, Jefferies forecasted the key driver for customers will be the relaxation of the current HK-crew strict quarantine policy, imposed since December 2021 and the reason for the year-to-date losses. The key date could be 21 April, when the first phase of HK social distancing measures are relaxed. Similar to the return to the second half of 2021 profit, cargo will be the driver.

Hong Kong and Chinese airlines have suffered their third year of loss