Report Published: "Hong Kong Retail Report Q3 2013"

The Hong Kong Retail Report examines the long-term potential of the local consumer market, but flags short-term concerns about the impact on Hong Kong's economic outlook of the struggling property market as prices become even more overstretched.

The report examines how best to maximise returns in the Hong Kong retail market while minimising investment risk, and also explores the impact of a weakening global and, more crucially, Chinese economy on the Hong Kong consumer and on the ability of producers and exporters to realise returns in the short term. The report also analyses the growth and risk management strategies being employed by the leading players in the Hong Kong retail sector, as they seek to maximise the growth opportunities offered by the local market.

Hong Kong per capita consumer spending is forecast to increase by 23% to 2017, compared with a regional growth average of 46%. Hong Kong comes fifth (out of seven) in BMI's Asia Retail risk/reward ratings, although it outperforms significantly for risk. Among all retail categories, consumer electronics will be the outperformer through to 2017 in growth terms, with sales forecast to increase by 24.5% between 2013 and 2017, from US$4.75bn to US$5.91bn as strong demand for high-end products such as multimedia notebooks, 3G phones and smartphones boosts the sub-sector. In the competitive arena, BMI sees upside potential in the government's establishment of the HKD300mn CreateSmart Initiative to guide development of creative industries outside of film and design.

Full Report Details at
- http://www.fastmr.com/prod/589151_hong_kong_retail_report_q3_2013.aspx?afid=301

Over the last quarter, BMI has revised the following forecasts/views:

* BMI expects Chinese recovery momentum to start to wane towards the latter stages of H113, which should place downward pressure on Hong Kong's growth prospects. Furthermore, our expectations for a property market correction will likely carry adverse implications for the city's service economy given the sector's reach across the entire economy. Taking these concerns into consideration, we are projecting real GDP growth to come in at 2.5%, compared with consensus expectations of 3.7%. We hold a less sanguine outlook on private consumption in 2013. While the Hong Kong consumer has remained relatively resilient thus far, the retail sector has started to exhibit signs of slowing. Additionally, on the back of our expectations of a property market correction, consumption spending will certainly take a hit. We consequently expect private consumption to slow to 3.0%, from an estimated 4.5% in 2012. This is expected to contribute 1.9 percentage points (pp) to real GDP growth.

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