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Hong Kong protests

Hong Kong protests start to take a toll on consumption

Territory's retail sales set to mark a double-digit decline in July-August

Chow Tai Fook Jewellery Group's store sales in Hong Kong .   © Reuters

HONG KONG -- Prolonged protests in Hong Kong against a proposed extradition bill have started to affect the territory's retail sector. With protests not showing signs of abating anytime soon, the region's restaurant and travel industries are bracing for what they expect will be a diminished version of their usual summer high season.

Simon Wong, president of the Hong Kong Federation of Restaurants and Related Trades, said retailers in the areas where big demonstrations had taken place were already seeing related effects, with some stores having been forced to close during the protests. Demonstrations, which have taken place almost every weekend since early June, have spread from central Hong Kong to the suburbs.

Protestors clashed with police in a commercial complex over recent weeks, which has started to affect consumer sentiment. According to data compiled by City University of Hong Kong earlier this month, Hong Kong's consumer confidence index in the April-June quarter stood at 77.7, down 4.1% from the January-March quarter. That was lower than the 80.2 recorded in 2014, when protestors occupied main roads for nearly three months during the Umbrella Movement.

Chow Tai Fook Jewellery Group's same-store sales in Hong Kong and Macao dropped 11% on the year in the April-June quarter, in stark contrast to an 11% increase in mainland China.

Cosmetics retailer Bonjour Holdings is expected to drop into a net loss in the January-June period. The Hong Kong Retail Management Association, which comprises supermarkets and other retailers, estimates that retail sales in July and August will mark a double-digit decline from a year earlier.

Hong Kong's retail sales had already declined for four straight months through May, dragged down by the U.S.-China trade war, among other factors. The Hong Kong protests have made the outlook even bleaker.

Standard Chartered Bank slashed its gross domestic product growth forecast for this year from 2.2% to 1.4%.

The Hong Kong protests have affected the movement of people, too. According to data provider ForwardKeys, airline bookings from Asia -- excluding mainland China and Taiwan -- to Hong Kong from June 16 to July 13 fell 5.4% on the year. Some 2 million protestors took to the streets on June 16.

As many as 51 million mainland Chinese visit Hong Kong annually for shopping purposes, providing a boost to the region's consumption. Following the demonstrations, HSBC estimates that mainland Chinese visitors will decline by 350,000 this year from its previous forecast.

Cosmetics retailer Sa Sa International Holdings, which operates more than 100 stores in Hong Kong and Macao, saw its same-store sales fall 15% in the April-June quarter, dragged down by a drop in puchases by mainland Chinese customers.

A company spokesman admitted the impact of Hong Kong protests, saying that social problems which started in the second week of June dealt a blow to the company's earnings.

Several brands have been unexpectedly caught up in the fallout. A Facebook ad for the gyudon beef bowl chain of Japanese fast-food operator Yoshinoya Holdings, which was seen as mocking policemen, was initially met with support from protesters who have been critical of the heavy-handed security forces.

But in the face of criticism, Hop Hing Group Holdings, which operates the Yoshinoya chain in Hong Kong and in mainland China, was reported to have sacked an employee who was in charge of the ad. CEO Hung Ming Kei, a member of the Chinese People's Political Consultative Conference, publicly expressed his support for the police.

In the resulting backlash against the company's support for the Hong Kong government, some online users in the territory said they would no longer visit Yoshinoya, forcing the Japanese company to board up some stores to brace for possible attacks from protestors.

Sun Hung Kai Properties, one of Hong Kong's largest developers, is under pressure as hundreds of people besieged the customer helpdesk of its high-end shopping mall in Sha Tin earlier this week. Protesters blame the developer's management for allowing police to enter the premises following a march last Sunday, leading to violent clashes between police and protesters that night. While SHKP denied that its staff allowed police in, some internet users have called for a boycott of the developer's premises.

Otsuka Holdings' sports drink Pocari Sweat has also been caught up in the controversy. While the company was applauded in Hong Kong when it stopped airing television commercials for the beverage on a local broadcaster accused of having a pro-Beijing bias in its coverage of recent protests in the territory, in mainland China there were calls on social media for a boycott of the drink.

A spokesperson for Otsuka Holdings' Chinese unit said Hong Kong's Pocari Sweat business was completely independent from the one in mainland China.

Many global companies do business in mainland China as well as in Hong Kong. If they are regarded to be supporters of the Hong Kong protests, they could come under fire in mainland China.

Given the far larger size of the Chinese market compared with Hong Kong, whose population is about 7.4 million, faced with a choice, companies are likely to seek to retain their mainland Chinese customers.

Nikkei staff writer Nikki Sun in Hong Kong contributed to this article.

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