Hong Kong:Solid Q3GDP on private consumption

Hong Kong’s GDP gained 0.9% (sa) q-o-q (Consensus: 0.5%, Nomura: -0.2%) in Q3 after a 0.4% increase in Q2.

    We expect flat GDP growth in Q4 as private consumption growth should slow and exports of goods and services likely to decline further.

    Nevertheless, we revise up our 2015 annual GDP growth forecast to 2.4% from 2.1% due to the stronger than expected Q3 print.

    Hong Kong’s GDP grew by 2.3% y-o-y in Q3 after 2.8% growth in Q2, exceeding market expectations of 2.0%. Solid private consumption more than offset declines in investment and in exports of goods and services (Figure 1).

    However, we believe growth momentum will fade markedly in Q4. First of all, increasingly negative sentiment on the property market from expectations of a Fed lift-off should lower property transaction volumes, with lower housing prices. This, combined with recent equity market corrections, will likely be a drag on private consumption. Inward tourism should remain weak as mainland tourists will likely spend less money due to subdued growth momentum in China and a stronger HKD. We expect GDP growth to slow to 0% (sa) q-o-q, or 2.1% y-o-y in Q4.

    Nevertheless, we revise up our 2015 annual GDP growth forecast to 2.4% from 2.1% due to the stronger than expected Q3 print (Figure 2). The Hong Kong government has set its 2015 GDP growth forecast at 2.4% from a 2.0-3.0% range.