Boston, MA -- (SBWIRE) -- 08/14/2013 -- As expected, construction activity in Hong Kong has decelerated, registering a low 1% y-o-y growth in Q113. We believe this is due to high-base effects, a near-term decline in the project pipeline and the potential for a steep slowdown in China's economic activity. As such, we maintain our view that construction growth in 2013 is unlikely to surpass previous highs, and will be lower than 2012. We are forecasting construction real growth in Hong Kong to decelerate from 11.3% in 2012 to 4.0% in 2013. However, we reiterate that this outlook does not mean a dearth in growth opportunities in the city over the long-term as the government has a large number of construction projects planned over the coming years.

Key developments in Hong Kong's infrastructure sector:

- In March 2013, MTR announced that it was scheduled to start a HKD1.6bn project to develop the Diamond Hill station in mid-April 2013. The upgraded and enlarged Diamond Hill Station will serve as the future interchange station between the Shatin to Central Link and the Kwun Tong Line. The move is part of MTR's strategy to transform Diamond Hill station into a major new railway hub for East Kowloon when the first phase of the SCL starts service in 2018.
- In April 2013, Hong Kong tram operator Veolia Transport proposed a plan to build a HKD2.8bn tram system instead of the proposed HKD12bn monorail system in Kowloon East. The operator argued that the tram system would not only be cheaper to construct, charge lower fares and use the existing bridge connecting the old airport taxiway to Kai Tak. This would eliminate the need to build a new bridge across the typhoon shelter - a pre-requisite for the construction of the monorail - and allow large ships to continue to use the Kwun Tong typhoon shelter. As of June 2013, the project remains at the planning stage and is
- In June 2013, Gammon Construction won a HKD8.66bn contract to design and build the viaduct section of the 9km Tuen Mun-Chek Lap Kok Link. The project also includes the design and construction of a 1.6km dual two-lane sea viaduct between the Hong Kong-Zhuhai-Macao-Bridge, Hong Kong boundary crossing facilities and North Lantau as well as the construction of nine smaller approach viaducts. Construction work is due to start in June 2013 and will be completed by April 2017.

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