Boston, MA -- (SBWIRE) -- 08/01/2013 -- We forecast IT spending in Hong Kong will reach HKD45.3bn in 2013, growth of 6.8% in local currency terms. There was a small upgrade to our forecast in the Q3 2013 update on the basis of a brighter economic outlook and specifically the investment taking place in datacentres. There is, however, downside to this outlook, with a potential hard landing in China likely to severely disrupt Hong Kong's economy and IT market. In the IT market, key growth trends include investment in datacentres as the city becomes a regional hub for cloud computing services, and the shifting composition of retail hardware spending as consumers move to tablets and hybrids/convertibles. Low-cost Android tablets and device innovation based on Windows 8 and Intel's Haswell chip architecture will extend this trend. The key sector of the economy will continue to be Hong Kong's large financial services industry, a target for cloud computing providers.

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Headline Expenditure Projections

Computer Hardware Sales: HKD19.1bn in 2012 to HKD20.3bn in 2013, +6.1% in local currency terms. Our forecast is raised this quarter on the basis of ongoing investment in datacentres, while growth of the main component of hardware spending, the PC market, will be driven by demand for tablets, hybrids/ convertibles and ultrabooks.

Software Sales: HKD10.6bn in 2012 to HKD11.3bn in 2013, +6.4% in local currency terms. Enterprise software demand is strong despite high penetration, with deployments increasingly complex. Meanwhile, the launch of Windows 8 will boost sales, particularly as XP support withdrawal comes closer.

IT Services Sales: HKD12.7bn in 2012 to HKD13.8bn in 2013, +8.3% in local currency terms. IT services will be the outperforming segment of the IT market as demand for cloud computing grows with strong sectors including financial services, government, telecoms, tourism and retail.

Risk/Reward Ratings: Hong Kong's score was 68.9 out of 100.0. Hong Kong ranks third in our latest Asia RRR table, behind South Korea and Singapore but ahead of Australia and neighboring China.

Key Trends And Developments

Hong Kong is developing into a key regional datacentre and cloud computing services hub, challenging Singapore. The government of Hong Kong is actively providing assistance to firms building datacentres in the country, as well as marketing the quality of telecommunications infrastructure, the pro-business policy environment, proximity to China and local talent. The strategy has seen some success, for instance, in June 2013, NTT Communications opened its HKD3bn datacentre - the largest in its global 140 datacentre portfolio. It reported strong demand for high-capacity services from the financial sector, a feature of the market we expect to fuel further investment by cloud computing providers such as Savvis, which is reportedly looking at expanding its presence into Asia.

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