HK’s China tourist malaise deepens

HONG KONG: Hong Kong’s sharp drop in visitor arrivals from mainland China has hurt retailers’ sales from luxury watches and gems, to anti-wrinkle cream and pastries as the slowdown deepens in the world's second biggest economy.

Net income at Sa Sa International Holdings Ltd fell 54% to HK$383.5mil in the year ended March 2016 on poorer sales to Chinese customers, and the cosmetics stores operator said Hong Kong’s retail market “will continue to face a number of challenges” amid China’s weak economy and stricter entry rules for mainland visitors.

Sa Sa’s poor outlook followed that of restaurants operator Tsui Wah Holdings Ltd, which said Wednesday profit for the year ended March 2016 will drop by more than 50%, also attributing it to a drop in Chinese customers.

Mainland tourists, who account for about 70% of visitors to Hong Kong, fell 16% in 2015 and slumped a further 13% in the first four months of this year, according to the city’s tourism board. “It would continue to be tough for retailers to do business in Hong Kong this year, for both high-end and low-end brands,” said Dickie Wong, executive director of Kingston Securities Ltd. Chinese consumers have gradually shifted their buying of luxury goods to other cities, while the weakness of the yuan curbed demand for cheaper products such as food and cosmetics, Wong said.

Sa Sa, which gets about 80% of sales from Hong Kong and Macau, rose 2.6% to HK$2.78 by the close of trading after it declared a special dividend. Tsui Wah, which specializes in Hong Kong snacks such as condensed milk buns, fell 2.1%, extending Wednesday’s loss of 8.5%. The benchmark Hang Seng Index rose 0.4%.

“We expanded in tourist locations to capture the strong demand from visitors in the previous years and now we need to adjust our store network as the market has changed,” Sa Sa chairman Simon Kwok said. — Bloomberg