{I-bank focus}Policy Address seen to take on recession risks

   BofA Merrill Lynch said the recent escalation of protests and disruption of business activities in Hong Kong has stirred up worries about its economic outlook in the near future.
  With all eyes on the upcoming Chief Executive's Policy Address scheduled for 16 October, the expectation is on the rise that key policies will be announced to counteract growth headwinds and tackle some long-standing social issues.
  The research house thinks the economy is facing more challenges, both due to continued local instability and external uncertainties. It is concerned about local consumer confidence loss and higher unemployment rate, given various media reports about store and restaurant closures and employees forced to take unpaid leave in recent months.
  Given stiffer growth headwinds, BofAML believes the Chief Executive will likely announce a series of counter-cyclical expansionary measures to support households, small and medium enterprises (SMEs), as well as those sectors adversely affected by protests.
  The government will likely provide financial support to SMEs in the retail and catering sectors, for example, in the form of rates reduction, utility subsidies or urging landlords/mall operators to lower rents. The government could also temporarily reduce profit taxes for SMEs. In addition, more relief measures and welfare benefits will likely be announced to support lower income households.