Opening of China border to impact HK’s retail market

Some retailers already saw an uptick in share prices.

Analysts from Jefferies said the reported border reopening between Guangdong and Hong Kong in mid-December would have a positive impact on the latter’s retail companies.

In particular, the firm said companies like Sa Sa and Lifestyle would benefit from the reopening because, historically, 85% of their sales come from Mainland tourists.

For the current financial year, Jefferies said Sa Sa and Lifestyle have a sales mix of tourists spending of 65% and 100%, respectively.

The share prices of the two companies and Chow Tai Fook also saw an uptick on 4 November amidst reports of border reopening, according to Jefferies.

In terms of earnings, however, the analysts said the impact would be “limited” given the travel quota and area restrictions.

“Nonetheless, the news is a step towards full opening up of the borders between the two areas,”  Jefferies said.

Through the reopening, the firm said Hong Kong’s duty-free sales could “challenge” Hainan's, but will “unlikely to return to its historical levels of tourist spending in the medium term.” 

The analyst added that further reopening of borders will have a “dilutive impact” on China Tourism Group Duty-Free Co. Ltd. (CTGDF).