Hong Kong retailers miss a rally amid dull outlook

Bloomberg

Hong Kong retailers are one group of shares being left behind as the city’s benchmark stock index trades near a four-month high.
Cosmetics seller Sa Sa International Holdings Ltd and Chow Tai Fook Jewellery Group Ltd are near the lowest levels in at least a year versus the benchmark Hang Seng Index, which has climbed 6.5 percent in 2019.
Investor interest in retail stocks has been muted as the opening of new transport links with the mainland failed to translate into a sizable increase in spending by tourists from across the border. Hong Kong retail sales grew just 1.4 percent in November from a year earlier, the slowest pace in 17 months, amid a worsening economic slump and a Chinese crackdown on gray-market imports of luxury goods.
“Hong Kong retailers’ sales are much worse than expected,” said Emily Lee, Hong Kong-based analyst at Nomura International (HK) Ltd. “It’ll be hard for same-store sales to recover in the first half.”
Analysts are cutting their share price targets at the fastest pace in years this month, though they still project sales of the city’s three major consumer companies will grow around 10 percent in the year ended March.
A test of whether the disconnect between rising tourist numbers and slowing sales growth will come on Wednesday, when retail data for December is released. The number of mainland tourists visiting the city surged 26 percent year-on-year to 4.6 million in November, near the highest since 2014, after the cross-border openings of a high-speed rail link to Shenzhen and bridge spanning the Pearl River Delta.
Retail stocks closed mixed in Hong Kong. Sa Sa fell 1.4 percent, while Chow Tai Fook rose 3.5 percent Luk Fook Holdings International Ltd. added 0.7 percent. Hong Kong is seeing more daytrippers thanks to the new links, but that’s not translating into higher retail sales.