HONG KONG — A recently proposed cut in the number of visas issued to mainland visitors to Hong Kong threatens to put a dent in luxury spending.
Hong Kong’s chief executive, CY Leung, has been soliciting opinions on a 20 percent reduction to the individual visitor scheme under which 40 million mainland Chinese visit Hong Kong every year. Visitors from China make up the majority of visitors to the city and mainland shoppers are a vital pillar to the city’s retail industry.
The individual visitor scheme makes up 67 percent of total mainland Chinese visitors in Hong Kong. In a note from J.P. Morgan, analysts said that a 20 percent reduction in the plan would cause a 14 percent decline in total mainland Chinese tourist arrivals in the city.
“Depending on details of the final plan, the impact on retail volumes and values could vary. If the reduction measures are aimed at lower tier city visitors, the impact on transaction values could be less negatively impacted than if the reduction is applied broadly against all mainland Chinese tourists,” J.P. Morgan analysts wrote.
"In the medium- to long-term, we would expect the reduction in tourists to impact rental costs," the analysts said. Retailers that depend on mainland Chinese tourists for sales, such as cosmetics and skincare retailer Sa Sa Group, apparel retailer IT, men's wear maker Trinity and fast fashion retailer Giordano, could see some short-term pressure on their stock prices, the analysts added.
Leung’s proposal comes amid increasing tension between Hong Kong and mainland Chinese, who have been blamed for raising property prices, buying up all the baby formula in the city, causing a shortage in public school spaces and generally putting a strain on the city’s resources.
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