Hong Kong Retail Falls to Record Low

RAPAPORT... Sales of jewelry and other luxury items in Hong Kong sank in August, marking the sharpest monthlydecline on record as protests in the municipality hit tourism and consumption. Revenue from jewelry, watches, clocks and other valuablegifts dropped 47% year on year to HKD 3.93 billion ($501.3 million) during themonth, the municipality's Census and Statistics Department reported Wednesday. Thatmarks the lowest monthly decline for jewelry since the department beganpublishing results in 2005, according to a public data archive. Sales across all retail categories slipped 23% toHKD 29.36 billion ($3.74 billion). Demonstrations against an extradition bill have been escalating since June, forcing luxury stores, train stations and the city's airport to shut down.Although the bill has been scrapped, unrest has continued, with police reportedly shootingan 18-year-old protester Tuesday, and more than 100 people, including 30police officers, being hospitalized amid theincreased violence. The situation has led to a sharp decline in travelers fromChina and abroad, as well as weakened local purchasing. The number of touristsvisiting Hong Kong was down 39% to 3.6 million in August, the Hong Kong TourismBoard reported. Of those, 2.8 million came from mainland China, a decline of42% over the same period last year. The overall retail decline was "even worse than that recorded in September1998 during the Asian financial crisis," a government spokesperson noted."Apart from the weak consumer sentiment amid subdued economic conditions, theplunge in August mainly reflected the severe disruptions to inbound tourism andconsumption-related activities caused by the local social incidents." The government expects weakness in the market to continue asconditions persist, it explained. "Retail sales will likely remain in the doldrums in the nearterm, as the worsened economic outlook and local protests involving violencecontinue to weigh on consumer sentiment and inbound tourism," the spokespersonadded. Swiss bank UBS also expects a continued decline in the market, noting a more challenging outlook for hard luxury, whichincludes jewelry and watches, versus soft luxury, comprising bags, leather andclothing. "This is particularly prevalent in the Chinese market, withhard luxury more exposed to recent [yuan] depreciation and protests in HongKong," the bank explained. "Because of their long-term availability and highprice tag, these are less likely to benefit from repatriation of demand in caseof short-term disruptions in Hong Kong. Note that 50% of Chinese diamondjewelry was purchased in Hong Kong in 2018, [so] the near-term disruptionsto sales [are] likely to be significant." In the first eight months of the year, retail sales ofjewelry, watches, clocks and other valuable gifts decreased 14% to HKD 50.06billion ($6.38 billion). Sales in all retail categories for the January-to-Julyperiod fell 6% to HKD 305.05 billion ($38.9 billion). Image: Police throwing tear gas at protestors in Hong Kong on September 29. (Shutterstock)