The continuing pro-democracy protests in Hong Kong are expected to cut the number of mainland tour groups heading to the city by nearly a third, which will take a toll on real-estate sales and retail outlets here.
For the second work day in a row, thousands of people flocked to rallies in three different districts of this former British colony, diverting traffic from key roads and prompting closures by banks, jewelers, and real-estate agencies.
The disruption took a toll on viewings of properties at real-estate agencies, property agents said. And the Hong Kong Monetary Authority said 33 branches of 19 banks were shut by late afternoon Tuesday.
Hong Kong real-estate companies and retailers normally look forward to China's Golden Week, which celebrates the establishment of the People's Republic of China. Mainland visitors to Hong Kong during the holiday week that begins Oct. 1 usually number in the millions. But with the potential decline in mainland Chinese visitors to the city due to the protests, some say they are worried. (Read The Wall Street Journal's live blog of the Hong Kong protests.)
"We haven't seen anything like this happen before," said Ricky Tse, chairman of the Hong Kong Inbound Tour Operators Association. He expects the protests will cause a 30 per cent drop in mainland tour groups heading to Hong Kong to about 200 a day for Golden Week.
"Hong Kong is famous for its metropolis lifestyle and is a shopping paradise for many tourists around the world," he said. "However, the continuing protests have damaged our image as a safe travel destination and could seriously affect our economy if things drag on."
The Hong Kong protests have been mainly focused on democracy and free elections. But another frequent gripe among Hongkongers, and especially young residents, is that property prices are too high and are inflated by money from mainland Chinese investors.
Shares of Sun Hung Kai Properties Ltd., the city's largest property developer, are down 5.4 per cent over the past two days. And Swire Pacific Ltd., one of the city's oldest conglomerates and owner of the Pacific Place shopping mall in Admiralty, has seen its shares fall 3.6 per cent over the same period. Admiralty is a focal point of the protests because of its proximity to the Hong Kong government's headquarters. The city's benchmark Hang Seng Index fell 1.3 per cent after falling 1.9 per cent on Monday.
Louis Chan, chief executive of the residential division at Centaline Property Agency Ltd., one of Hong Kong's biggest real-estate companies, said he expects the protests to put potential buyers off viewing new properties. He said the number of property viewings on Hong Kong island fell 50 per cent over the past weekend, when protesters blocked the streets.
"I think the overall property sales will drop by 30 per cent this week compared with early September if the street protest continues," Mr. Chan said.
Centaline said it suspended service at its Central branch for the past two days due to the protests, while rival Midland Holdings Ltd. said it relocated operational staff from its Central headquarters, as well as from Mong Kok and Admiralty, to other branches in the city. Centaline and Midland account for more than 50 per cent of Hong Kong's real-estate transactions.
Sammy Po, chief executive of Midland Realty's residential department, said number of property viewings in its Wan Chai and Causeway Bay branches fell 50 per cent in the past two days, compared with a week earlier.
"The primary sales sentiment is likely to be hit by the Occupy Central event as investors take a wait-and-see attitude," Mr. Po said.
Retailers specializing in jewelry and cosmetics, which are both heavily taxed in mainland China, were hit by declines in Hong Kong trade. Shares of jewelry chain Luk Fook Holdings International Ltd. closed up 3.9 per cent on Tuesday after declining 4.8 per cent Monday, while Chow Tai Fook Jewellry Group Ltd. rose 1.7 per cent, after falling 3.8 per cent on Monday. For a second day, Chow Tai Fook closed a branch near the Sogo department store in Causeway Bay, which is a prime Hong Kong shopping area.
Sa Sa International Holdings Ltd., the city's largest cosmetic retailer, rose 0.2 per cent Tuesday after falling 3.1 per cent Monday.
Many of these stocks had already fallen in recent months as China's economic slowdown and anticorruption campaign cut overall mainland spending in Hong Kong.
"The retail stocks are in a short-term technical rebound after they dropped sharply in recent weeks," said Ben Kwong, associate director of brokerage KGI Asia, adding that the peaceful tone of the overall pro-democracy campaign has alleviated some investor worries.