The financial cost from the months of protests across Hong Kong are starting to have a deeper impact on the region’s finances and wider economy with retail sales falling a record amount in August and billions of dollars of bank deposits fleeing the region.
Anti-government protests have swirled across Hong Kong for four months with a step up in the already widespread levels of violence this week as China celebrated the 70th anniversary of the People’s Republic.
The intensifying protests means that more gloomy figures on retail sales and investment are expected in coming months.
Goldman Sachs reckons $US4 billion in deposits may have been moved from Hong Kong to Singapore banks in the September quarter.
Reuters reported that Hong Kong’s stockpile of deposits stood at HK$13.6 trillion ($US1.73 trillion) in August.
The violence though has yet to have a significant impact on the Hong Kong stock market. The Hang Sent Index fell 1.6% in the past quarter and is down 11% so far this year.
While other markets such as the ASX, the S&P 500, and the Dow are up double digits so far in 2019, the sell-off hasn’t been as violent as some of the TV pictures might suggest.
In fact, according to Reuters companies raised $US15 billion in new listings in Hong Kong in the first nine months of 2019, second only to New York.
And Budweiser Brewing Company APAC raised about $US5 billion in its initial public offering on the Hong Kong Stock Exchange, making it the second largest IPO in the world this year.
“But Hong Kong dollar deposits in the city dropped in August for the most in over a year while U.S. dollar savings surged. The Hong Kong Monetary Authority (HKMA) insisted on Monday that the fluctuations were “normal” but some analysts said the move reflected moves by depositors to switch out of the local currency and into the greenback which is far more easier to move out of the city.
But tourism numbers are weak, as is consumer spending and every other indicator.
However, the 23% plunge in retail sales in August (after a 13% slump in July) is a shocker.
The August slump was the worst monthly decline on record, according to the Hong Kong Census and Statistics Department.
Luxury items have been the biggest victims, according to the data released Wednesday. Sales of items such as jewelry, watches, clocks and other valuable gifts dropped a massive 47% from a year ago, a record decline.
Department-store sales are down 30% from a year ago as the protests have repeatedly disrupted traffic and prompted many stores to shut down on Hong Island and in around Causeway Bay.
Analysts at Bank of America Merrill Lynch said the steep drop in inbound tourists in August, mostly due to mainland Chinese visitors electing against visiting Hong Kong, was the main catalyst for the drop. “We do not expect a turnaround in retail sales before year end and are concerned about a higher unemployment rate,” it said.
Analysts say they also expect a slide in mainland visitor numbers for the current seven day Golden Week holiday to also impact retail and other sales for October.
