Retailers to see mini boom from handouts

PUBLISHED : Friday, 04 March, 2011, 12:00am
UPDATED : Friday, 04 March, 2011, 12:00am

The government's HK$6,000 cash handout is expected to be good news for shopkeepers, pushing up the value of retail sales by as much as 5 percentage points this year, according to one report.

'Consumers tend to spend a large proportion of these giveaways,' wrote CLSA Asia-Pacific Markets analysts Aaron Fischer and Mariana Kou, citing the experience in Australia in 2009 by way of example.

Assuming that Hongkongers spend one-third to half of the payout, their report said the giveaway could boost retail sales by 3 to 5 percentage points, on top of CLSA's original forecast of 18.4 per cent annual growth this year.

Financial Secretary John Tsang Chun-wah proposed on Wednesday to distribute HK$6,000 cash to each of the six million adult permanent residents, totalling HK$36 billion. CLSA said the total amount represents around 11 per cent of the city's annual retail sales, which was worth over HK$320 billion last year.

The Australian government handed out A$950 to each person to boost the economy in 2009, the brokerage said.

'The Australian handout represented around 5 per cent of annual retail sales, and we estimated that the retail sales were boosted by around 1.5 to 2.5 per cent, implying that between 30 and 50 per cent of the handout was spent,' the research said.

It added that retailers and landlords, including Hutchison Whampoa, Dairy Farm International Holdings, cosmetic company Sa Sa International and fashion brand I.T, would be the key beneficiaries of the handout.

Another proposal to cut taxes on salaries by up to to 75 per cent capped at HK$6,000, might not have a significant impact as 'the plan is not new'.

Irina Fan Yuen-yee, senior economist at Hang Seng Bank, believed half of the HK$36 billion payout would benefit mostly the retail sector and other industries.

She said the bank originally estimated retail sales to rise by 11 per cent this year, but would adjust the figure upward.

Simon Wong Ka-wor, president of the Hong Kong Federation of Restaurants and Related Trades, expects one-tenth of the payout to be spent on dining out.

Peter Chu Ka-lok, chairman of the Hong Kong and Kowloon Electrical Appliances Merchants Association, also expects clients to be more generous when buying electronic goods such as iPads. Wing On Travel's director and general manager Jo Jo Chan said it immediately saw a 50 per cent increase in the number of people booking trips to Japan and Korea on Wednesday after the proposed payout announcement.

'Worried about inflation, consumers were very cautious in the first two months this year. But the payout provides a relief to that pressure psychologically and hence the boost to their buying sentiment,' she said.

Total retail sales in January increased by 28.2 per cent year-on-year to HK$37.6 billion, the Census and Statistics Department revealed yesterday, while total retail sales volume increased by 23.6 per cent.

Spending power

Assuming Hongkongers spend a third to half of the payout, retail sales could be boosted by as much as this amount: 5%