Hong Kong retail sales will continue to rebound in 2018, industry experts predict
Improvements in retail sector expected to continue after sales rose for the tenth month last December, reversing a two-year slump
The recent recovery in Hong Kong’s retail sector will spill into this year, along with a continuous improvement in the number of tourists visiting the city, retailers have said.
Hong Kong’s retail sales will rise nearly 4 per cent this year, continuing last year’s rebound – which stood at 3.2 per cent – as more tourists are expected, Thomson Cheng, chairman of the Hong Kong Retail Management Association, the largest organisation of its kind with over 9,000 retail outlets, said on Thursday.
Hong Kong retail sales rose for the tenth month last December, reversing a two-year slump, official figures show. The steady rebound is set to continue as the city expects a bigger uptick in tourist arrivals and increasing purchasing power thanks to tax cuts.
A stronger yuan will also contribute to the sector’s solid momentum, Cheng said.
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The currency rose 9.4 per cent in the past year against the Hong Kong dollar, which is pegged to the US dollar.
The Tourism Board said more than 60 million visitors – around nine times the city’s population – are expected to pour into Hong Kong this year, marking a 3.6 per cent rise over last year. Visitors from mainland China comprised 76 per cent of the overall tourists, official figures show.
“We think it will grow three to four per cent this year, closer to four per cent since the economy is getting better and consumer sentiment is improving,” Cheng said.
Local consumer spending may also increase, thanks to Financial Secretary Paul Chan Mo-po’s budget plan which will cut salary tax for 2017-18 by 75 per cent and increase the middle class’ purchasing power.
However, the effect of tax cuts may not be as strong as cash rebates, Cheng said.
“Purely from the retail perspective, we would more welcome the government to pay direct cash to all of the citizens here,” he said. “But the current budget plan is better for the Hong Kong economy in the long run.”
Chan declined lawmakers’ calls to hand out one-off cash packets to the public on grounds of sustainability of fiscal policy, while the surplus for 2017/2018 financial year is expected to be a record HK$138 billion.
Despite the optimism, retailers are still worried about rising rents and labour costs.
“I would not say [the tax cuts] are a boost,” said Annie Yau Tse, chairwoman and chief executive of local jeweller TSL, citing other elements that can affect residents’ purchasing power, such as a more volatile stock market and a weaker US dollar, which will potentially compete for mainland visitors with Hong Kong.
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“Because of the rebound last year, more landlords are thinking of pushing up the rentals again, which will put more pressure on our [profit] margins,” Cheng said.
Members of the Hong Kong Retail Management Association are planning to give their employees a pay rise this year, which ranges from two to five per cent.
Auditing firm PwC projects Hong Kong’s retail sales will grow four to six per cent in 2018, which is equivalent to about HK$465 to HK$480 billion, with a positive outlook for the next five years.
The government will release retail sales figures for January 2018 on Friday, which will be closely watched as the holiday season figure is set to drive up retailers’ revenue before the low season in March starts.