The political turmoil caused by anti-reforms in Hong Kong triggered a series of demonstrations and violent clashes
The retail industry was the first to suffer. The international rating agency Moody’s expects that this year’s retail performance will be worse than that of the 2014 occupation movement. Performance fell by 0.2%, which is more serious than the 3.7% decline in Hong Kong’s retail industry during China’s anti-corruption work in 2015. Moody’s expects that companies operating in Hong Kong will also be affected, but due to its financial stability, the impact is limited.
Moody’s issued a report yesterday, saying that if the wave of demonstrations from June continues, it is bound to further crack down on Hong Kong’s retail industry this year. The situation will be more serious than the occupation campaign lasting about three months in 2014, when retail sales fell 0.2%. The agency estimates that after the anti-corruption work in the PRC, the retail performance in 2015 and 2016 fell by 3.7% and 8.1% respectively. I believe that this year’s decline will be between the two.
Retail sales data fell for five months
The report pointed out that the Sino-US trade war and the unstable political situation in Hong Kong have caused the retail industry to suffer from both internal and external factors. At the same time, it will also drag down the revenue of the shopping malls. As some of the shopping mall operators are divided into the turnover of the merchants, the bargaining power of the shopping malls to increase the rents. It will also be under pressure. The retail sales data of Hong Kong has fallen for five consecutive months. The weak performance will affect the credit rating of Hong Kong.
However, Moody’s believes that the overall impact is limited because the mall operators themselves have diversified businesses, the leases are interlaced and processed properly, and there is a modest rental return. These companies also have a sound capital flow and financial status, and a strong financial buffer. Moody’s estimates that if the merchant’s revenue is reduced by 10%, it will only reduce the store’s revenue by about 5%.
According to retail sales data released by the Census and Statistics Department, the preliminary estimate for June was 35.2 billion yuan, down 6.7% year-on-year. The spokesman said that the increase in the decline reflected that the local consumer sentiment was more cautious and the increase in the number of visitors to Hong Kong slowed down. It also pointed out that factors such as the deterioration of the global and local economic outlook continued to affect consumer sentiment and it is expected that the short-term performance will remain weak. The authorities also pointed out that if the recent large-scale demonstrations continue, it will further drag down the retail business.
The Hong Kong Retail Management Association also pointed out last month that even in July and August, the summer peak season is expected to record a double-digit decline, which will undermine Hong Kong’s international image of safe cities, gourmet capitals and shopping paradise.
Royal Garden Hotel supplier reduced price 5%
The retail market is dim. Xindi (016)’s five-star Royal Garden Hotel recently sent a letter to suppliers asking suppliers to provide 5% purchase discount to reduce and overcome future operational burdens. In the letter, the Royal Court pointed out that other hotel peers have also adopted contingency plans in response to political incidents, reducing costs at key moments, and pledging to adjust to the original state after the economic recovery. A spokesman for the Royal Court replied that the arrangements were only voluntary and temporary. There have been similar arrangements in the past.