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Consumer sentiment suffering

Dennis Eng

Fears about job losses, shrinking wealth and a gloomy outlook are taking their toll on consumer sentiment.

Hong Kong is hoping for the best but increasingly bracing itself for the worst from the fallout from the financial crisis in the United States.

Conversations inevitably turn to job losses, cancelled holiday plans and the toning down of displays of wealth or extravagance.

'One person said he decided not to buy a new car as it would send the wrong message to clients,' one source said.

Members of HSBC's research team were being encouraged to liaise with clients via video conferencing instead of flying to meet them, said a source familiar with the banking giant. If flying was necessary, they should travel to Shenzhen airport to board flights, which are cheaper than those departing from Hong Kong.

Doug Rumsam, managing director of Bordeaux Index's Hong Kong office, said people's investment focus had changed to reflect greater caution although the wine distributor was expected to weather the storm.

'At the moment, there is a diversion of attention away from buying luxury in such a wanton manner,' Mr Rumsam said.

Although the extent of the damage would depend largely on any developments in global financial markets this week, consumers remain cautiously optimistic about Hong Kong's near-term prospects.

The Peninsula hotel has so far not experienced the kind of belt-tightening expected from customers worried about the fallout from a global financial meltdown. A hotel spokesman said business during the fourth quarter of the year, which was a peak period for tourism, was expected to be the same as last year.

Boris de Vroomen, managing director of Moet Hennessy Diageo Hong Kong, said consumers were probably in a better position to cope with the current crisis than they were a decade ago.

Charles Li Kui-wai, associate professor of economics and finance at City University, also sounded a more positive note, pointing to the still robust mainland growth and relatively 'clean' European Union market. But he admitted consumer sentiment would remain low even if the financial markets improved.

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