Booming economy leads to cautious optimism

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HONG KONG--From a handful of sleepy fishing villages inhabited by Hakka Chinese 200 years ago, Hong Kong has been transformed by tumultuous political and economic forces into a global financial, trading and transportation hub.

Officially known as the Hong Kong Special Administrative Region of People’s Republic of China, the scenic territory is comprised of more than 260 islands. Dozens of beaches and tree-filled mountain peaks lined with hundreds of miles of hiking trails often surprise first-time visitors expecting to see little more than a dense concrete jungle.

Attracted to its deep water harbor and convenient location on the eastern side of the Pearl River Delta near Guangdong, western powers have coveted Hong Kong, which means “Fragrant Harbor” in Chinese, since the first known foreigner, Portuguese mariner Jorge Álvares, set foot on Hong Kong island in 1513.

Hong Kong Island was first occupied in 1841, by British forces that took formal control the following year under the Treaty of Nanking. The island was designated as a British Crown Colony in 1842, and its largest settlement was named after Queen Victoria. The British took over Kowloon Peninsula, across the harbor from Hong Kong Island, in 1860, after China’s defeat in the Second Opium War.

In 1898, the U.K. signed a 99-year lease for the rest of the territory in modern-day Hong Kong, including Lantau Island, now the home of Hong Kong’s sleek, modern international airport, and a track of land north of Kowloon called the New Territories.

The colony remained under U.K. control until July 1, 1997, when Hong Kong, by then a financial powerhouse, was ceremoniously returned to Communist China under a "one country, two systems” policy. Fears among some residents, as well as foreign leaders, that Chinese tanks would roll through Hong Kong's designer-laden streets proved unfounded.

In fact, ten years on, consumers in the former British colony appear to be riding a wave of unprecedented confidence, despite battling a regional currency meltdown in 1997 and the effects of the SARS epidemic, which originated in nearby Guangzhou, in 2003.

Prosperous, self-assured and sophisticated, Hong Kong consumers inhabit the world’s fifth-most upbeat market, a big jump from the tenth spot last year, according to The Nielsen Co. In the research company’s latest global consumer confidence survey, conducted last May, Nielsen polled over 26,000 internet users in 47 markets from Europe, Asia/Pacific, North America and the Middle East about their job prospects, the state of their own finances, and what they do with their spare cash. The survey included 500 people aged 15 and above in Hong Kong.

In the six months since the survey was last conducted in November 2006, consumer confidence fell in 35 of the 47 countries covered by Nielsen’s global consumer survey, said Fanny Chan, managing director of Nielsen’s Hong Kong office. “But Hong Kong consumer sentiment, in particular, appears to have reached an all-time high, with an index of 118, up from 111 in 2006.”

Eighty-six percent of Hong Kong residents are optimistic about local job prospects in the next 12 months, Hong Kong has recorded the greatest increase in consumer confidence about personal finances, with three-quarters of respondents saying they are “optimistic,” compared with just two-thirds giving that answer in November 2006.

More than 60% believe now is a good time to spend money in general. Hong Kong tops the world with the largest percentage of respondents saying they will invest in stocks and shares (58%).

“It’s also worth noting that Hong Kong consumers seem to be less conservative about their personal financial situation, with the number of people who claimed to have no spare cash declining from 9% to 3% this time around, benefiting from an improving job market and a hot stock market,” said Ms. Chan.

Despite a more upbeat sentiment, Hong Kong consumers remain cautious about the economy, she added. “The lesson from the 1997 financial crisis is still top-of-mind among many people in Hong Kong. While the economy is improving, people are still concerned about how long it is going to last or how to play safe in the case of a decline.” Because Hong Kong’s job market is improving, however, “concern about job security has come down significantly from 47% to 34%.”

Hong Kong consumers are also among the most tech-savvy in the world, with heavy use of high-tech gadgets. For example, more than nine in 10 people in Hong Kong own a mobile phone (94%), 84% own a personal computer or a laptop computer, and over half own a digital camera (60%).

Eight in 10 households have internet access at home, on top of near universal access from the office during the day. However, only 16% of Hong Kong households own a car, because of the lack of affordable parking in urban areas as well as a highly developed and inexpensive local transportation system.

Despite cries of self-censorship among the territory’s democratic activists, Hong Kong’s media landscape has changed dramatically in the past couple years. The number of newspapers, for instance, has grown to 20, from 16 in 2002.

“Competition has been intense and the impact of free papers launched in 2005 has now become more evident. Less than half of the Hong Kong population now only reads one newspaper, compares to two-thirds back in 2002,” said Helen Pemberton, director of Nielsen Media Research in Hong Kong. Metro, for example, now claims to have 908,000 daily readers in Hong Kong.

“People are more information-hungry and turn to additional sources of information, rather than replace one with another as newcomers enter the media space,” she added.

Pay-TV viewing is hitting new heights as well, with 48% of Hong Kong’s population subscribing to Hong Kong Cable or PCCW’s NOW Broadband TV service, a 12% increase from 2004.

Outdoor advertising is “the next trend to watch,” said Ms. Pemberton. “Its potential is enormous with the rapid introduction of new technology facilitating greater creativity and drawing attention more than ever before.”

Fast Facts: Hong Kong
Population (2006): 6.8571 million
GDP (2006): $188.7 billion
Area: 1,104 sq km
Language: Cantonese/English
Adspend (2006): $6.283 million
Year-on-year change: +7.8%
Adspend as a percentage of GDP (2006): 3.3% (based on NMR media coverage)
No. of total TV households: 5.342 million (99.5%), of which 48% are pay-TV households
No. of pay-TV households (cable and broadband): 2.578 million (48%)*
*base: aged 12-64 (population: 5.071million)

Average cost of 30”spot during prime time (18:45-23:05) on Hong Kong's most popular channel, TVB Jade, Monday - Friday (based on rate card value): $26,844

Top 10 advertising brands by adspend on TV (2006)
1. Wong Wong (snacks/confectionary)
2. McDonald’s
3. Fortune Pharmacal (pharmaceuticals)
4. HSBC (banking/finance)
5. TVB (Hong Kong TV station)
6. Aji Ichiban (snacks/confectionary retail chain)
7. Promise (banking/finance)
8. Olay (Procter & Gamble)
9. Wrigley’s Extra (Wm. Wrigley Jr. Co.)
10. Hang Seng Bank (banking/finance)

Top 10 advertising categories on TV (2006)
1. Medications & tonics
2. Entertainment & leisure (bookshops, fast food, photo finishing, record stores, TV/video & videotape rental)
3. Skincare products & services
4. Entertainment (cinemas, event sponsorship, gambling, movies, museums and art galleries, theatres, plays and concerts, theme parks/amusement parks, trade exhibitions & fairs)
5. Personal hygiene & health
6. Retail
7. Haircare products & services
8. Leisure – Video/audio (including blank audio/video tape, Pre-recorded records/CD/videos/VCD/DVD)
9. Confectionery
10. Credit/debit cards and discount cards

Source: Nielsen Media Research, The Nielsen Co.
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