Hong Kong Q3 rebound suggests slowdown has hit bottom

Modest recovery underway, says Hang Seng Bank.

The most encouraging news is that the upticks was driven not by base effects but by domestic demand expansion.

Here's more from Hang Seng Bank:

The advance release of Hong Kong’s Q3 GDP suggests a bottoming out of the slowdown, albeit the economy continued to grow at a below-trend pace. Real GDP printed a 1.3% increase in Q3 following an expansion of 0.9% in the first half. The outturn follows relatively optimistic Q3 GDP releases in mainland China and other Asian countries.

Encouragingly, the recovery was not due to base effects. The city resumed quarter-on-quarter expansion of 0.6% after shrinking 0.1% in the preceding quarter. That confirms our long-held view that the economy has seen its bottom of this cycle in Q1.

Looking into the details, nascent recovery in domestic demand helped to offset a slowdown in external demand. The stabilisation in consumer and investment sentiments partly reflected the positive effects of policy easing put in place earlier this year.

The government has fine-tuned its 2012 growth forecast from 1-2% to 1.2%.

The solid Q3 economic growth and upbeat October data lead us to become increasingly convinced that a modest recovery is underway. There remain, however, challenges ahead in the global economy. Our forecast continues to look for a moderate growth through the remainder of 2012 and 2013. We call for a full-year growth of around 1.5% this year and penciled in a 3% growth in 2013.