HONG KONG, June 25 (Reuters) - Hong Kong exports in May dropped by 14.5 percent from a year earlier, still very weak but much less than expected and the smallest decline since December, a further indication that the trade sector may have bottomed out.
On a seasonally adjusted basis, exports in March-May rose 1.3 percent from the preceding three months, government data on Thursday showed.
Exports in May to mainland China fell 10.8 percent, compared with a 12.5 percent decline in April, while shipments to the United States dropped by 15.7 percent, compared with a 24.7 percent decrease in April. Shipments to Taiwan edged up 1.5 percent, while exports to India and Vietnam were virtually flat.
A Reuters survey had forecast a 19.6 percent drop in May's exports from a year earlier.
Imports in May fell 19.2 percent, more than the forecast 18.3 percent decline.
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KEY POINTS:
May Apr Mar
pct* pct* pct* Exports -14.5 -18.2 -21.1 Imports -19.2 -17.0 -22.7 *Pct change on a year earlier. Seasonally adjusted (percent change on three months earlier):
Mar-May Feb-Apr Jan-Mar Exports +1.3 -9.9 -17.9 Imports +2.5 -8.4 -18.3
COMMENTARY:
TONY NAFTE, ECONOMIST, CLSA
"It's a good number, in line with what we've been seeing in other countries in Asia. We're getting a rebound in the inventory cycle and we've seen that in Korea and Taiwan's (exports).
"However, we think that this is just an inventory rebound and underlying demand is pretty weak. So, although exports have come off a low level, we don't expect they'll improve much from here and will continue to contract at around this level.
"We think the U.S. economy won't turn up until the second half of 2010. So we anticipate weak trade flows until then and Hong Kong will always be a reflection of that."
KEVIN LAI, SENIOR ECONOMIST, DAIWA INSTITUTE OF RESEARCH
"Exports must have bottomed out in February. The worst is over. It's time to celebrate. Leading indicators such as the U.S. ISM and U.S. consumer confidence expectations' data are up and that suggests we'll have a much better time in the next three months.
"China is playing a very important role here: China and the U.S. were the main drivers of the slower decline in May exports.
"I expect that by August we'll see just a 5 percent decline in exports and year-on-year growth in exports towards the end of the year. A trade recovery will lead Hong Kong out of recession some time in the third quarter and supports my top-of-the-range forecast that GDP will contract 2 percent this year."
PAUL TANG, SENIOR ECONOMIST, BANK OF EAST ASIA
"This is much better than expected. One reason is that our exports to the mainland improved for a second month, partially because a lot of manufacturing plants on the mainland are receiving orders.
"Exports to the U.S. also improved. We've heard a lot about a rebound in demand to replenish inventories, and I think this is the main driver of our exports. In the next few months I think this improvement will continue. I'm confident that some time in the fourth quarter we'll see exports turn positive."
GOVERNMENT STATEMENT:
"Hong Kong's external trading environment will remain challenging going forward. Nevertheless, with the global economy showing signs of stabilisation and the mainland (China) economy improving, these positive developments should render support to Hong."
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:
-- May exports to Germany plunged 21.9 percent and to te UK fell 15.4 percent. In Asia, exports to Malaysia fell 42.3 percent and to Korea dropped 21.6 percent while shipments to Japan fell 20.9 percent.
-- Hong Kong posted a HK$11 billion ($1.4 billion) trade deficit for May.
-- Exports were likely to continue to decline in coming months amid weak demand from recession-hit Western economies, analysts said. That would further depress Hong Kong's economy, which slipped into recession in the third quarter of 2008.
-- The government forecasts the economy will shrink by 5.5 to 6.5 percent this year, its first full-year contraction since the Asian financial crisis in 1998.
-- Hong Kong's exports and imports are predominantly re-exports to and from China, where exports fell 26.4 percent in May from a year earlier. (US$=HK$7.8) (Reporting by Susan Fenton, Editing by Ken Wills and Chris Lewis) (susan.fenton@thomsonreuters.com; +852 2843 6367; Reuters Messaging: susan.fenton.thomsonreuters.com@reuters.net)