HK retail faces structural trouble, DBS warns

Hong Kong's struggling retail industry is bracing for a "structural rather than cyclical recession" and an economic recovery in the Chinese mainland may not be enough to boost the sagging sector, multinational banker DBS has warned.

DBS Bank Hong Kong economist Lily Lo Ming-lee noted that the structural problem lies in the changing consumption pattern of the city's inbound mainland tourists, who are choosing instead to travel further afield to new destinations including Japan and South Korea. The booming growth in e-commerce and duty-free stores on the Chinese mainland is making them more comfortable to go shopping at home.

Against such a backdrop, even if the mainland's economy takes a turn for the better, Hong Kong's retail sector could hardly expect to show signs of a rise very soon, she cautioned.

Lo said local retailers may pin their hopes on a slump in retail rents. However, since a fall in retail rents is largely seen in prime locations and street-level shops, she believes overall average retail rents will not go down until the middle or even the end of the year.