Overall trade deficit may widen from HKD 35b to HKD 42b

In view of the increasingly challenging external demand picture, September trade numbers (to be announced on 25 October)  are likely to extend the recent moderating trend, to 6.2% y/y for exports and 11.4% for imports (versus August numbers of 6.8% and 14.1%, respectively). If true, this means that the overall trade deficit should have widened slightly to HKD 42bn from HKD 35bn prior.

A prolonged period of low growth in the West, together with a soft landing in China, could mean further downside risk to export growth in the coming months, if not quarters. This should translate into a bigger drag on overall economic growth, which is only likely to be offset by still-strong domestic demand.