Listed Hong Kong retailers feel the pinch as trade war, protests weigh on sales
- Retailers such as Aeon Stores (Hong Kong) have posted profit warnings with the stock exchange for first half of 2019
- Stock prices of Bonjour and Giordano have dropped 19 per cent since the beginning of the year
The outlook for listed Hong Kong retailers has taken a hit from the US-China trade war, as well as unrest in the city, analysts said on Monday.
Retailers such as Aeon Stores (Hong Kong), Bonjour Holdings and Giordano International have posted profit warnings with the Hong Kong stock exchange for the first half of 2019. They have attributed a drop in sales performance to a weaker retail environment and poor market sentiment in the economies of Hong Kong and China as a result of the trade war and the depreciation of the yuan, according to their filings with the exchange.
Bonjour also cited “demonstrations and social unrest in Hong Kong” as having an impact on its financial performance for the first half this year.
“We are pretty cautious about the outlook for the retail sector for July and August, given what has been happening these couple of weeks,” said Mariana Kou Chung-yin, head of China education and Hong Kong consumer research at CLSA.
“Tension is rising [between the US and China], and there is a lot of uncertainty in Hong Kong. That is really a wild card,” Kou said. “We haven’t seen a very sharp downturn in interest numbers, but I think there is cause for concern.”
Kenny Wen, wealth management strategist at Everbright Sun Hung Kai, said: “Since the beginning of the year, Hong Kong’s economy has been worse than expected, and this will have an impact on consumer sentiment.
“The mood in the investment markets is lacking, and investors will tend to be more picky when choosing stocks. Money will not flow into stocks with an uncertain outlook,” Wen said.
“Hong Kong’s consumer and investor sentiment has only really started to show signs of uncertainty this month,” Wen said. “These factors were not reflected in the results of the second quarter, so I think there will be greater uncertainty in the second half of 2019.”
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Giordano said it might report an about 38 per cent decrease in unaudited profits attributable to shareholders for the first half of 2019, while Bonjour said it was expecting to report a net loss for the period. Tsui Wah Holdings reported a 94 per cent drop in profit for the year ending March 31, 2019, as compared with the same period last year.
The stock prices of Bonjour and Giordano have dropped 19 per cent since the beginning of the year, while Aeon Stores has declined by 9.5 per cent.
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Retail companies have also blamed the implementation of a new e-commerce law in China, which has affected “daigou”, or the common practice in mainland China of buying on somebody else’s behalf, and new accounting standards in Hong Kong at the beginning of the year, as having “a major impact” on their financial performance.
