Ecominc of hong kong analysis and textile industry

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1. EIC Analysis

2. HONG KONG ECONOMY ANALYSIS The Hong Kong economy is struggling to recover from the series of shocks experienced between 2019 and 2022. Following political and institutional upheavals in 2019 and 2020, the territory was severely affected by the health crisis up until last year. In 2023, activity is recovering, but Hong Kong is now facing the weakening in external demand and, above all, significant tightening of monetary conditions. The rise in interest rates since March 2022 has impacted domestic demand, particularly through its effects on the property market. Fiscal policy, meanwhile, remains resolutely expansionary. ECONOMIC REBOUND AFTER FOUR YEARS OF SUCCESSIVE SHOCKS Hong Kong’s economic growth averaged -1.3% per year in 2019-2022 (vs. +2.7% per year in 2012-2018). This poor performance has stemmed from an accumulation of shocks: local protests and institutional change in 2019-2020, the pandemic shock and the strict Covid policy applied until mid-2022, the loss of investor confidence, rising US-China tensions and external trade disruptions, and the rapid tightening inmonetary conditions since Q2 2022.

3. Story in charts The government has kept an accommodative fiscal policy stance since 2019, with the implementation of large, one-off stimulus measures such as health spending, temporary employment schemes and direct support to enterprises and households. As a result, general government spending and fiscal deficits have reached record high levels since 2020. After more than a decade of fiscal surpluses (3.0% of GDP on average in 2009-2018) and moderate spending (18% of GDP on average), the government posted a small deficit of -0.6% of GDP in the fiscal year FY2019/20 (extending from April 2019 to March 2020).

4. India’s Textile and Apparel Market Size I nd i a n T &A M a r ket S i z e (2022-23 estimates) US$ 165 Bn Dome s t i c M a r k e t US$ 125 Bn Exports U S$ 4 Bn Apparel U S$ 9 2 Bn H om e T e x t il e s US$ 9 Bn T e c hn i c a l T e xt il e s US$ 24 Bn Apparel US$ 16.5 Bn Textiles US$ 23.5 Bn Indian textile and apparel market size is estimated to be US$ 165 bn. in 2022-23. Data Source - DGCI&S, Wazir Analysis D o m e s t i c m a rk e t contributes ~76% to the market size while exports have a share of rest 24% d o m e s t i c apparel Within market, a cco u n t s share fo r ~ 74% f o llo w e d by technical textiles with a share of 20%.

5. Industry Analysis Textile companies with a better product profile, strong export clientele, an integrated business model and expanded capacities are expected to post strong double-digit earnings growth of 20-41% over FY2023-25E, which is much better as cw to earlier years. In view of strong medium to long term outlook, we are upgrading our view on textile sector Positive from Neutral earlier. With a recovery on cards, we believe it is right time to invest in some of quality textiles companies with strong growth prospects and understressed balance sheets..

6. K e y Ha p pe n i n gs Exports Went for a Rollercoaster Ride Indian textile and apparel exports started the year on a strong note. In the first half of 2022, they crossed US$ 20 bn. (12% higher over same period in 2021) hinting at all time highest exports, but in the later half they declined dramatically. T&A exports in 2022 are expected to be 8-10% lower than the last year. FTA Signing and Discussions India concluded two FTAs in 2022; with UAE and Australia. The most anticipated one, with the UK, however, could not be signed and is on cards for 2023. Also, India and Canada resumed FTA negotiations after a gap of almost five years and discussing an interim trade deal first. New State Textile Policies In 2022, Bihar joined the list of Indian states that have dedicated textile sector policies. The states of UP and Odisha released their new textile policies, after expiry of the previous ones. Central Government Initiatives 64 projects in manmade value chain (fabrics, garments an technical textiles) were approved under Production Linked Incentive (PLI) Scheme with a cumulative investment of approx. US$ 2.5 bn. In October, Ministry of Textiles released a draft of the Production Linked Incentive 2.0 scheme. Under National Textile Technology Mission (NTTM), 63 new projects were approved in 2022 with a total project cost of approx. US$ 20 mn. 6