Hong Kong August retail sales rise faster on stock market, tourism

Oct 2, 2007 - Hong Kong retail sales growth accelerated in August from the previous month, lifted by rising incomes, tourist spending and improved job prospects, the government said Tuesday.

Retail sales by value increased 15 percent to 20.6 billion Hong Kong dollars, faster than July's revised 14.3 percent gain. The figure, however, was less than the 15.5 percent forecast of economists polled by Thomson IFR.

"The trend of higher retail sales will continue in coming months, especially in the last quarter because of the Christmas season," said Daniel Chan, senior investment strategist at DBS Bank in Hong Kong. "The main driving force continues to be domestic consumption and tourism."

Faster growth along with a booming stock market resulted in higher incomes for most of Hong Kong's nearly 7 million-strong population and boosted demand for computers, televisions, cameras and other electronic goods. The economy expanded 6.3 percent in the first half of the year, faster than the government's estimate.

The stock market reached record levels in August, propelled by China's announcement on the 20th that it would allow individual investors to trade Hong Kong stocks directly. The loosening of China's investment rules helped the Hang Seng Index recover from a slump that was caused by the subprime mortgage crisis that began in the US.

The key stock index rose 3.4 percent in end-August to a record 23,984 points from end-July, according to data provided by Chan.

"The overall thriving stock market in August despite some market volatilities arising from the US sub-prime mortgage turbulence, together with the further expansion in inbound tourism, also helped'' push retail sales, the government said in a statement.

Electronic goods and photo equipment, jewelry and watches rose the most during the period, it said Sales of electronic items jumped 37.7 percent, while those of jewelry and watches gained 31.8 percent. Sales of footwear and clothing accessories increased 19.5 percent, and those of motor vehicles and auto parts were up 15.7 percent.

Tourist arrivals rose 16.9 percent in August to a 2.8 million, the highest single month on record, according to the Hong Kong Tourism Board. Tourists from China, who comprised over 60 percent of the total, grew 23.5 percent.

"The trend of mainland tourists will continue to boost Hong Kong retail sales, despite the competition posed by Macau," Chan said.

Retail sales account for about a third of private consumption, one of the key drivers of Hong Kong's gross domestic product.

For the whole year, retail sales may grow between 10 to 15 percent , said Frances Cheung, an economist at Standard Chartered Bank in Hong Kong.

"The favorable employment outlook, wage increases and vibrant stock market will result in a double-digit growth for retail sales in the last quarter of this year," Cheung said.

Hong Kong's jobless rate hovered at a nine-year low in June to August, with the number of employed persons reaching a record 3.5 million.

Mainland Chinese are flocking to Hong Kong to shop "because they are assured of the quality of the merchandise here," Cheung said.

Retail sales by volume grew 12.5 percent in August from a year ago, less than the 12.9 percent estimate of economists but higher than July's 12.1 percent increase.

(1 US dollar = 7.80 Hong Kong dollars)