China Slowdown Ripples Through Hong Kong as Retail Sales Weaken - San Francisco Chronicle

June 1 (Bloomberg) -- China's economic slowdown is rippling through Hong Kong, with the city's retail sales rising at the slowest pace since 2009 as shoppers from the mainland curb their spending.

Sales increased 11.4 percent in April from a year earlier, the government said in a statement on its website yesterday. That's the smallest annual gain since October 2009, excluding January and February numbers distorted by the Lunar New Year holiday. The median estimate in a Bloomberg News survey of economists was for a 16.4 percent increase.

China's economy is cooling as Premier Wen Jiabao extends a crackdown on speculation in the housing market and Europe's sovereign-debt crisis caps exports. In Hong Kong, declines in the benchmark Hang Seng Index since the end of February have damped confidence and demand as households see the value of their assets dwindle.

"Less extravagant spending by mainland shoppers is part of the issue," said Donna Kwok, a Hong Kong-based economist at HSBC Holdings Plc. "Local households are also being more prudent because of increasing turbulence in financial markets."

The smaller-than-estimated gain in retail sales came the same day as jewelry maker and retailer Graff Diamonds Corp. shelved a $1 billion initial public offering in Hong Kong, blaming "consistently declining stock markets."

Graff Pulled

Graff marketed its IPO amid a slowdown in luxury-goods spending in Hong Kong, where Chinese tourists splurge to take advantage of lower tax rates than in the country's mainland. Sales of jewelry, watches and valuable gifts in Hong Kong rose an average of 17 percent in the first three months of the year compared with a year earlier, according to data compiled by Bloomberg. That's down from growth of about 37 percent in the last quarter of 2011, the data show.

Hong Kong billionaire Cheng Yu Tung's worth has dropped 22 percent this year to $15.6 billion, according to data compiled by Bloomberg, as Chow Tai Fook Jewellery Co. dropped 35 percent in Hong Kong trading. Cheng's Chow Tai Fook Holding Ltd. owns 89 percent of the East Asian regional jewelry retailer, according to the data.

Hong Kong's benchmark Hang Seng Index fell 0.3 percent yesterday.

--Editor: Joshua Fellman, Ben Livesey

To contact the reporter on this story: Paul Panckhurst in Beijing at ppanckhurst@bloomberg.net

To contact the editor responsible for this story: Paul Panckhurst at ppanckhurst@bloomberg.net