Hong Kong retail sales:Overshadowed by “OC”

类型：行业研究机构：麦格理证券股份有限公司研究员：Terence Chang,Linda Huang 日期：2014-09-30

Event

    Hong Kong retail sales for August turned positive for the first time sinceJanuary this year with 3.4% YoY growth, improving from -3.2% in July. This isabove the consensus estimate of a 2.0% decline. However, this positive newswas likely overshadowed by the onset of the “Occupy Central” (OC)movement over the past weekend. While this may cast a near-term overhang,the narrowing decline on the gold jewellery & valuable items growth shouldlikely provide some support to Hong Kong retail sales. YTD retail salesdeclined by 1.0%.

    Impact

    August rebound overshadowed by “Occupy Central” movement. AugustHong Kong retail sales grew 3.4% in value, and 2.8% in volume, beating theconsensus estimate of a 2.0% decline in value and 3.4% decline in volume asthe drag from the jewellery, watch and valuable gift sales decline significantlyimproved. August retail sales, stripping out jewellery retail sales, grew 6.4%YoY, vs 3.3% in July. YTD, retail sales ex watches and gold jewellery grew4.1% YoY. However, the onset of the “Occupy Central” movement may likelyimpact 1st October holiday retail sales, due to disruptions to retail operators.According to the government, the earlier mid-autumn festival compared to lastyear also brought forward a portion of retail sales to August.

    Decline significantly narrowed for watches and jewellery; departmentstores turned positive. August department store sales increased by 2.1%YoY, up 3.3ppts from -1.2% in July. Volume grew by 1.0% in August, up4.3ppts from July. The jewellery and watches decline narrowed to -6.1% YoYfrom -22.4% in July. Volume declined YoY by 6.8%, compared to -24.1% inJuly. Apparel and footwear, supermarkets, food and beverage still sawpositive growth. Medicine/cosmetics further picked up to 17.2% from 14.2% inJuly. YTD, watch and jewellery retail sales declined by 16.3% YoY, whileDept. Store sales grew 2.4%.

    Sensitivity on select Hong Kong retailers. The news media reportedthat Chow Tai Fook closed around 30 stores out of the total 87 stores inHong Kong today due to traffic conditions in the neighbouring area. Someretailers are also worried the movement will impact 1st Oct traffic andsales performance. Assuming the impact will last for one month, therevenue impact on Lifestyle will be 1.9%, Chow Tai Fook 2.4%, Luk Fook3.3%, Chow Sang Sang 2.3%, Emperor 6.0%, Oriental Watch 5.8%, SaSa 4.7% and Tsui Wah 0.7%.

    Outlook

    We believe HK retailers will be under pressure as long as the "OccupyCentral" protest lasts. There should not be any names that are immune fromthe systematic risk. However, there could be a good chance to accumulate aquality name. Lifestyle remains our favourite HK player given that the TSTnew store opening could be a catalyst.