Hong Kong Unrest Causes ‘Worst Ever’ Retail Decline, With Thousands Of Stores Threatened
Over 10% of retailers in Hong Kong—thousands of stores—could shut down in the next six months, with more than 5,600 jobs set to be lost, as the city faces its “worst ever” wave of store closures and layoffs amid ongoing protests that continue to disrupt Hong Kong’s economy, Bloomberg first reported.
The Hong Kong Retail Management Association (HKRMA) found in a new survey that the outlook for retailers is becoming increasingly dire after months of anti-China protests.
Almost all survey respondents (97%) said they had recorded losses since the citywide unrest began in June: 30% of those also said they would have to lay off an average 10% of employees in the next six months, losing over 5,600 retail jobs in total, while 43% of retailers said they might have to close down completely within six months, according to Reuters.
The survey, released on Monday, covers chain stores and small retailers, encompassing some 176 companies, over 4,000 stores and 89,700 employees in total.
Going into the crucial holiday period in December, which is usually a busy shopping season, the retail industry is at a new low, in part due to a lack of Chinese consumers: “If cash flow doesn’t improve and landlords don’t help, there will be a wave of layoffs and business shutdowns … this will be the worst ever in history,” said HKRMA chairwoman Annie Tse in a press briefing on Monday.
Compared to last year, retail sales fell by 25% in October—the steepest drop on record for the city’s once-bustling retail industry. Sales for December are similarly expected to be at record lows or slip even further, according to Tse.
“Hong Kong’s protests continue to darken the economic picture by deterring tourists and, by extension, sapping retail sales,” says Evan Rees, an Asia Pacific analyst with geopolitical intelligence firm Stratfor. “Exacting particular economic pain, mainland tourists, who account for 80 percent of arrivals, have dropped off sharply due to reports of protesters targeting mainlanders as well as the rising Chinese nationalist backlash against Hong Kong unrest.”
Key background: The pro-democracy protests, which started in June, have thrown Hong Kong’s economy into a recession, with industries like retail, tourism and hospitality getting extremely hard hit by the turmoil. “The retail declines come amid a perfect storm for the Hong Kong economy, which has been dragged down by the U.S.-China trade war, the structural slowdown in China and dampened global demand,” Rees says.
Crucial quote: “Since Hong Kong is part of China, the retail slowdown will be an added factor weighing on Chinese economic growth,” says Nicholas Sargen, economic consultant at Fort Washington Investment Advisors. “It’s part of a bigger story about China that investors are watching to see how developments play out, but it is too early to act on the news.”
Chief critic: Despite the slowdown in some of Hong Kong’s most important economic sectors, its stock market is still an “attractive” investment, Dan Rohr, head of global equity research at Morningstar, recently told Bloomberg. He specifically highlights the consumer, healthcare and education spaces as areas of value.
What to watch for: “Going into 2020, the city's protests show little sign of abating, and the possibility of a direct intervention by Beijing remains ever present,” Rees says. “Given that such protests are set to become the ‘new normal’ in Hong Kong and there is little room for compromise, tourism flows and retail numbers will have difficulty recovering to previous levels.”