Travel curbs crimp expectations for retailers in Hong Kong
Updated: 2015-04-14 09:16
By LUO WEITENG(China Daily)
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Chinese mainland tourists visit the Disneyland in Hong Kong on July 22, 2012. [Photo / CFP] |
Scaling back the multiple-entry permits for mainland visitors may deal a severe blow to the retail industry in the Hong Kong Special Administrative Region, industry analysts said on Monday.
In its research report published on Monday, Bank of America Merrill Lynch slashed its recently revised retail sales forecast for Hong Kong this year from a 3.5 percent year-on-year drop to a 5.8 percent year-on-year drop.
The report followed a Ministry of Public Security announcement that residents of Shenzhen will no longer receive multiple-entry permits to enter Hong Kong. A policy was enacted on Monday to limit their travel to "one visit per week", although, as expected, multiple-visit permits already issued remain valid.
Previously, residents of Shenzhen, Hong Kong's neighboring city on the mainland, were allowed unlimited visits to Hong Kong with their entry permit.
The US research house said this restriction could effectively cut the number of multiple-entry permit holders visiting Hong Kong by around 30 percent, thereby helping avoid abuse by parallel goods traders.
In 2014, according to official figures, some 14 million mainland visitors traveled to Hong Kong on multiple-entry endorsements under the Individual Visit Scheme, accounting for about 23 percent of the total 60.8 million visitor arrivals and about 29.6 percent of total mainland visitor arrivals.
Within these 14 million visitors, there were actually only 1.7 million people crossing the border, suggesting that on average, each permit holder crosses the border about eight to nine times every year, said Merrill Lynch.
Merrill Lynch's views were echoed by Goldman Sachs Group Inc, which expects the new one-visit-per-week policy, aiming to reduce the number of parallel goods trading and the conflicts between mainland tourists and Hong Kong residents, to suppress the number of mainland tourists' visits by 10 percent and lead to a 2 percent retail sales decline for Hong Kong.
The already weakened retail sector in Hong Kong, especially the low-end cosmetics industry, will further take a hit due to the one-visit-per-week limit, said Goldman Sachs.
Share prices of Sa Sa International Holdings Ltd tumbled 6.24 percent to close at HK$4.06 (52 cents) on Monday while Bonjour Holdings Ltd plunged 7.14 percent to close at HK$0.65.
Mid-tier beauty products retailer Sa Sa, which has been actively expanding its business in New Territories, a peninsula that constitutes one of the three main regions of Hong Kong, and around 70 percent of whose sales come from mainland visitors, is believed to be the perfect victim from the new policy, noted Barclays Bank Plc.
Meanwhile, the city's jewelers are also under pressure. Luk Fook Holdings (International) Ltd sank 3.77 percent to close at HK$23 on Monday while Chow Tai Fook Jewelry Group Ltd fell 2.93 percent to close at HK$8.95.
However, the impact of cutting down on visitors traveling on multiple-entry endorsements may only be vividly felt by Hong Kong retailers in cross-border regions, said DBS Bank Ltd economist Lily Lo, who said the negative impact on the city's retail industry as a whole remains limited.
The Singapore-based bank previously forecast the city's retail sales in 2015 will increase 3 to 5 percent year-on-year and has not yet lowered its forecast in the wake of the new policy.
Lo said DBS will possibly downgrade its retail sales forecast by 0.5 percentage point due to the new policy.
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