Luxury shopping hub Hong Kong records worst retail sales since SARS

Hong Kong retail sales in January slid 14.6 percent from a year earlier in their worst showing since the Asian financial hub was routed by the severe acute respiratory syndrome scare in 2003.

While a late Lunar New Year was partly to blame - the holiday fell in mid-February this year but in January last year - economists say protracted pro-democracy protests hurt tourism.

Big spending mainland Chinese shoppers are avoiding Hong Kong after protests shut down key parts of the city for two and a half months at the end of last year. China's slowing economy and anti-graft campaign have also changed consumption patterns.

A report from CLSA said China's ultra-wealthy are choosing more exotic holiday locations. Those coming to Hong Kong are more middle class travellers who buy basic necessities such as infant milk formula and diapers as opposed to luxury goods.

"Weaker spending power among mainland visitors is seen as the main reason for the weak data, while recent protests also hurt the shopping mood among many mainland tourists," said Bank of East Asia Chief Economist Paul Tang.
Tang said the results were expected and the bank will stick to its low single-digit retail sales growth forecast for 2015.

The Hong Kong Retail Management Association (HKRMA) expects 2015 retail sales performance to grow about 5 percent.

Hong Kong's provisional retail sales for January of HK$46.6 billion ($6.01 billion) were 14.6 percent lower than a year earlier. Jewellery, watches, clocks and valuable gifts were among the hardest hit, sliding 21.4 percent.

The figures were Hong Kong's worst monthly performance since April 2003 when retail sales fell 15.2 percent to HK$12.7 billion.

"I don't see any factor that can boost the sales in the immediate run," HKRMA chairwoman Caroline Mak told a conference call, adding she was pessimistic on the retail sector, particularly as weaker foreign currencies such as the yen and euro were drawing mainland shoppers to other markets.

Cosmetics company Sa Sa International Holdings Ltd gave an early glimpse of weakness in the sector when it said on Tuesday its Lunar New Year sales in Hong Kong and Macau were 10 percent behind where they were last year.

The number of mainland Chinese visitors to Hong Kong during the first three days of the new year holiday fell for the first time in about 20 years, according to a major travel industry group, as a new front of radical activists have turned shopping malls into a new battleground.

Hong Kong Chief Executive Leung Chun-ying has promised he will raise concerns about Chinese tourists with central government authorities while he is in Beijing for China's annual parliament meeting.

"It will not be an easy task, in Hong Kong or anywhere else, to place restrictions on a right that people have already enjoyed," Leung told reporters on Tuesday, referring to calls for tightening or scrapping of the multiple-entry permit policy from China.

HK$1 = US$0.13 / £0.08

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