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Eddie Lee

Amy Nip

The market may be euphoric, but there are still glum faces around.
The effects of the stock market's continuing good run have not percolated down to every sector.
Retailers and caterers expect just modest, if any, extra sales driven by a still-distant wealth effect. But they fear it may not be enough to cover the lost custom caused by the recent drop in the number of mainland tourists visiting and spending in the city.
Fewer mainland tour groups came to Hong Kong in the first quarter, their numbers slipping by about 21 per cent from a year earlier to about 28,600, the Travel Industry Council says.
In the last month alone, the decline was even bigger - 41.9 per cent.
Whether the steep fall has been due to rising anti-mainlander sentiment in the city or rising costs triggered by the stronger Hong Kong dollar, its impact on the local retail sector is stark.
For 2014 as a whole, the value of total retail sales was HK$493.3 billion. In the first two months this year, retail sales dropped by 2 per cent compared to the same period last year, largely due to the continuing slump in the luxury sector.
Mainland tourists contributed to about one third of local retail sales value, among which 12 per cent comes from day trippers.
In 2013, mainland tourists who went to Hong Kong on same-day trips spent an average of HK$2,720. An overnight tourist spent HK$8,937.
The Hong Kong Retail Management Association expected March sales would drop by a range of 5 to 8 per cent.
William Wong Wai-sheung, the chairman of Luk Fook Jewellery, jokes that stock brokers probably have to "earn more" in the following month before they will start spending on luxurious items.
But they cannot compensate for lower tourist spending, he says. "Tourists come in very large numbers. There are few local big spenders," he explains.
He recalls seeing such big spenders before the burst of the dot com bubble in 2000.
"They would spend several million [Hong Kong] dollars, sometimes more than HK$10 million on one item. It could be jade or a several-carat diamond," he says.
Simon Wong Ka-wo, president of the Federation of Restaurants and Related Trades, expects this year's restaurant receipts to be similar or less than last year.
Although there has been a bull run in the Hang Seng Index recently, external factors are far from positive, Wong says.
"If the stock market continues to fare well, of course people who profit from it will be more willing to spend their money. But among the seven million population, not everyone invest in stocks," he says. "It is not necessary for the index to go up all the time. When the situation reverses, people lose money [and become unwilling to spend]."
Battered by shrinking sales and sky-high rents, even major retail outlets have started moving out of prime locations and transferring to cheaper places.
Kowloon Watch, founded in 1952, is closing down its branch store in Sha Tin city centre, one of the most popular shopping destinations in Hong Kong among mainland tourists.
The company's general manager Kevin Wong says the shop faced a 40 per cent rent increase, as the current lease would expire next month. He rues the continuing increase in rent despite a shrivelling market for luxury goods. But he says: "Higher rents are understandable considering the fact that the shop was bought at a high cost."
The watch seller has 11 stores across the city, including the Sha Tin branch, its website says.
Wong says a change of marketing strategy is inevitable: "We will shift our focus from mainland tourists to local customers."
As the luxury sector is suffering, he says: "We aim to sell more mid-priced watches."
Shop owners who have been struggling along may still hope for the eventual advent of a full-blown wealth effect brought about by the stock market's extended gains.
A recent study conducted by Hong Kong Exchanges and Clearing (HKEx) found that about 2.25 million Hong Kong adults, representing 36.2 per cent of the Hong Kong adult population, were stock investors at the end of last year, topping the 35.7 per cent of the previous survey.
The median stockholding value among all stock investors was HK$200,000. That large group of people could be a main driver of the city's consumption growth if they continue to make money in the stock market.
But economists say there is a time gap before the wealth effect can stimulate consumption.
Ryan Lam, senior economist of Hang Seng Bank, says changes in consumption usually occur three or four quarters after the perceived increase of wealth.
Dr Tommy Leung Tin-cheuk, an assistant professor of economics at Chinese University, says there is a long-term correlation between the performance of the economy and the stock market. However, it is a period spanning years rather than days or months.
The United States, for example, has been recovering from the subprime mortgage crisis. But stocks went up quicker than the overall economy, he says.
For now, retailers and caterers are still holding their breath, waiting for more signs of the good times to come.


Bull run has not been felt on the street yet

The sharp decline in free-spending mainland visitors coming to Hong Kong is bad news for shops struggling to cope with soaring rents. Many stores are now moving to cheaper locations. Photo: EPA

As Hong Kong's stock market surges, are the good times back for big spenders?

Car trader Paul Law predicts sales at his company could be 10 per cent higher than normal for this time of year. Photo: Nora Tam

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The market may be euphoric, but there are still glum faces around. The effects of the stock market's continuing good run have not percolated down to every sector.
