Hong Kong's domestic demand sluggish in March

But external demand improved.

It has been noted that growth indicators in the first two months of each year tend to be volatile, due to the shift in the timing of Lunar New Year holidays.

According to a research note from Morgan Stanley, further, looking beyond the near-term distortions, the incoming data still paints a picture of weak domestic demand.

Property transactions have also softened after a period of robust growth, Morgan Stanley noted.

Here's more from Morgan Stanley:

On the other hand, external demand growth has improved at the margin, with exports growth in Jan-Feb 2015 combined picking up to 5.0% YoY as compared to 1.2% YoY in 4Q14.

As domestic demand continues to face the headwinds of anemic wage growth and subdued corporate sentiment, we are closely watching whether the recent improvement in external demand growth is sustainable in the context of assessing the overall growth trajectory.