New | Falling sales in Hong Kong and China bank concerns all indicators of darker times to come

A rise in non-performing loan provisions at China's banks combined with falling sales at Hong Kong retailers may be a barometer of darker economic clouds to come.

That is the takeaway from the latest round of corporate results. As forward indicators of China's economic health and the fallout for Hong Kong, both are flashing amber right now; though analysts caution it is still early days, and the slowdown in Hong Kong retail sales in particular, could also be reflective of changing Chinese travel tastes as much as belt tightening.

"It's a mixed picture. Why have provisions (for bad loans) gone up? Look at the (falling) import and export figures. When people worry about the economy they spend less," said Louis Tse, a director of VC Brokerage.

The murky outlook is one reason many Hong Kong analysts have spent the past fortnight lowering earnings expectations and stock price guidance on listed companies. In most instances, however, buy/sell ratings have been left unchanged.

Rising concerns are also in part a reaction to the two month-long stock market slide, and knee-jerk government response, which have tested the faith of investors in Beijing's management of the country's economic growth.

"What happens in the stock market are symptoms of the structural problems in the underlying economy. The best news out of the Chinese economy was two years ago," said Chen Zhiwu, a finance professor at Yale, in a recent Council of Foreign Relations media call.

That is not to say there are no bright spots. Among key sectors, profits at Hong Kong-listed airlines like Air China soared on lower fuel prices and growing Chinese wanderlust, while insurers such as Ping An recorded impressive policy sales growth.