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Saturday, October 18, 2014, 11:50

DBS slashes growth forecasts for HKSAR

By Gladdy Chu in Hong Kong
 DBS slashes growth forecasts for HKSAR

A citizen pushes an old lady in wheelchair on Nathan Road, Mong Kok, as the traffic is blocked by “Occupy” protesters. (Parker Zheng / China Daily)

DBS has slashed its GDP growth projections for Hong Kong for the fourth-quarter and the full year from two percent to zero percent, and to between 1.6 and 2.1 percent from 2.6 percent, respectively, assuming the current protests would end this month.

"The two weeks of demonstrations have pinched Hong Kong’s economy, and retailers are bearing the brunt,” the Singapore-based banking group said in its latest report on Friday, analyzing the initial impact of the “Occupy Central” campaign.

The report noted that although the protests have contributed only partly to the SAR’s weak performance in the retail sector so far this year, they have undoubtedly aggravated the woes of retailers who had hoped to see a turnaround during the traditional shopping season.

But, despite the ongoing crisis, DBS said it does not expect the city’s unemployment rate to go up.

The “Occupy” campaign began as Hong Kong jobless rate hovers at a low 3.3 percent, DBS noted. “Hong Kong’s existing labor shortage and a high degree of labor mobility lend some buffer to a temporary decline in labor demand due to the ‘Occupy Central’ campaign. Because of this buffer, a short-term shock to limited areas of the retail market will not lead to an immediate rise in the unemployment rate,” the report said.

Besides the hit on the overall economy, the drawn-out protests have bred more short-term volatility in the local stock market and longer-term concerns for Hong Kong’s status as the region’s yuan offshore center.

The report added that the worry is that the mainland could slow down the opening up of its capital account amid political upheavals, impacting the development of Hong Kong’s offshore yuan market.

In a research report on Oct 3, Deutsche Bank warned that the protests could force a delayed launch of the much acclaimed Shanghai-Hong Kong Stock Connect scheme. “A deterioration in the political environment will weaken Beijing’s will to expand Hong Kong as the testing ground of capital account opening,” it said.

Similar sentiments were expressed by the Hong Kong Association of Banks (HKAB), which said in a statement on Oct 17: “Many business sectors were adversely affected by the protests. Banks had to close some branches temporarily, creating inconvenience for the general public.

"The longer the protests persist, the more negative impact there will be on Hong Kong’s economy and the financial sector, severely undermining the city’s competitiveness and status as an international financial center,” HKAB said.

However, DBS said it still believes that internationalization of the yuan is a long-term agenda and Hong Kong is likely to remain an integral part of it.

The protests in Hong Kong began on Sept 29, bringing some of the city’s busiest commercial districts, such as Admiralty, Causeway Bay and Mong Kok, to a standstill. Since late-September, the mainland has stopped packaged tours to Hong Kong.

"Sales fell by at least 15 percent in the first five days of the National Day ‘Golden Week’ holidays, compared to a year earlier,” the Hong Kong Retail Management Association said on Oct 7, citing a survey among its members, “Watch and jewelry shops were among the hardest hit.”

As reported by China Daily earlier, Sam Cheuk, president of the Hong Kong General Chamber of Jewellery, said the demonstrations have significantly affected tourist shopping sentiment.

"Our members told me that during the ‘Golden Week’, the average spending of mainland shoppers fell by 30 to 50 percent,” Cheuk said, adding that total sales during the week were expected to drop by 30 percent compared with a year earlier.

Retail sales of popular tourist items had contracted year-on-year for seven consecutive months prior to the “Occupy Central” campaign as a result of the mainland’s economic slowdown and the anti-corruption drive, both of which are expected to last well into 2015.

Chow Tai Fook, the world’s largest pure-play jeweler by market capitalization, recorded a 20-percent decline in same-store sales growth for the three months ended Sept 30, year-to-year, with a 10-percent drop in the growth of retail sales value.

Luk Fook Jewellery said on Oct 15 its same-store sales growth in Hong Kong and Macao was down by 20 percent from July 1 to Oct 7, adding that the growth rate for the same period last year was 33 percent.

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