Hong Kong Blames Trade Spat for Worst Retail Sales in 17 Months

(Bloomberg) -- Hong Kong retail sales growth slowed in November, and dampened sentiment from the trade tensions between U.S. and China is partly to blame, the government said.

• Retail sales rose 1.4 percent from a year earlier in November, the slowest growth since June 2017, according to the Census and Statistics Department on Thursday. Retail volume rose 1.2 percent, which was also the slowest increase in 17 months.
• The median economist estimates for retail sales and volume were 4.5 percent and 4.6 percent, respectively.

Key Insights

• “Cautious consumption sentiment” due to uncertainties like the trade tensions and volatility in global financial markets contributed to the moderated growth, a government spokesman said in an official statement.
• The jewelry, watches and clocks category -- which made up nearly one-sixth of total nominal retail sales in November -- fell 3.9 percent, the biggest contraction among the major categories.
• Overseas markets including Hong Kong suffered a sales drop as Chinese consumers kept more of their luxury purchases within mainland China than before, due to yuan depreciation, import tax cuts and enhanced online shopping experiences.
• December retail sales is likely to have had mid-single-digit positive growth due to “intensified marketing efforts by major shopping mall landlords”, Nomura analysts Joyce Kwock and Shawn Wang wrote in a note dated Jan 3, adding hotel occupancy and room rates saw similar similar growth during Christmas.

Market Reaction

• Prada SpA fell 2.8 percent as of 10:47 a.m. in Hong Kong, while Sa Sa International Holdings Ltd. declined 1.1 percent. Chow Tai Fook Jewellery Group Ltd. dropped 0.8 percent. The benchmark Hang Seng Index rose 0.9 percent.

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• Luxury brand Tiffany & Co. reported lower sales contribution from Chinese tourists in the Americas and Hong Kong in the third quarter, while growth inside China’s domestic market accelerated from previous quarters.
• Bank of America Merrill Lynch said in November that Chinese consumer growth will likely to normalize and "move more onshore" as Hong Kong has started to lose share.

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