Hong Kong conglomerate Wharf remains optimistic despite plunging retail sales at two of its major malls because an upbeat mainland Chinese property market is exceeding expectations. Retail sales at the company’s two flagship malls, Harbour City in Tsim Sha Tsui and Times Square in Causeway Bay, dived by almost 20 per cent year on year in the first quarter. Chairman and managing director Stephen Ng Tin-hoi said the sharp fall outpaced Hong Kong’s overall retail market decline. “That has been the trend for the past year. But we have seen a slower drop in March and we also expect April’s [sales] to have fallen less rapidly than a year before,” Ng said after the company’s annual general meeting in Hong Kong on Wednesday. Hong Kong recorded its biggest retail slump since 1999 when sales shrank by 12.5 per cent year on year in the first quarter. I believe we can turn things around ... and sustain moderate growth this year Stephen Ng, Wharf At least 20 per cent of the combined gross floor area at Wharf’s malls is leased to luxury retailers, which have taken a hit with a dwindling number of mainland visitors. Alfred Lau, an analyst with Bocom International, said Wharf’s Hong Kong businesses was likely to continue to suffer as it was one of city’s largest retail landlords. “The two malls make up almost half of their total assets and if their client’s retail sales fall, it would likely hit [Wharf’s] turnover rental income,” he said. But Lau added that even though the retail environment remained challenging, many retail brands would agree to increases in their base rents in order to stay in prime locations. Hong Kong conglomerate Wharf's shares fall to three-year low after sales underperformed at major malls Ng said Wharf was “not too pessimistic” about its outlook. “I believe we can turn things around ... and sustain moderate growth this year,” he said. “It’s only still May now.” While Hong Kong retail sales were lacklustre, the company said a recovery in the property market in mainland China had helped boost business. Wharf’s property sales on the mainland in the first four months of the year totalled 11 billion yuan (HK$13.1 billion), with record monthly sales of 4.4 billion yuan last month. The company, which has both residential and commercial projects in more than a dozen mainland cities, sold 26 billion yuan worth of property developments last year. Hong Kong’s Wheelock mulls raising its stake in subsidiary Wharf “China’s property market is thriving, we’ve never sold so much in a month ever before,” Ng said. All four first-tier cities – Beijing, Shanghai, Guangzhou and Shenzhen – posted double-digit year-on-year home price increases in the first three months of the year, according to figures from international credit rating agency Moody’s Investors Service. At least 40 major cities reported rising residential prices in March, up from 32 cities in February. Despite the mainland property market pick-up, Ng said Wharf’s Hong Kong businesses remained the main driving force of its performance. Real estate accounts for the majority of Wharf’s business portfolio, but the conglomerate also runs hotels, and owns media and telecommunications assets in Hong Kong.