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Hong Kong is in a recession as five months of protests take a toll

Hong Kong is in a recession as five months of protests take a toll

Hong Kong is headed for recession, as five months of protests send tourism and retail numbers plunging.
The Asian financial hub is expected to report negative economic growth on Thursday, which means Hong Kong is facing "a technical recession," or two consecutive quarters of economic decline, Paul Chan, Hong Kong's financial secretary, said in a blog post Sunday.

Exports for the three months that ended in September plummeted more than 7% compared to the same period a year earlier, Chan said. That's the largest quarterly drop in nearly a decade, he added.

Chan said the city also may not reach its forecasted growth of between 0% and 1% for all of 2019.

Hong Kong's economy has been hit hard by the one-two punch of the US-China trade war and China's economic slowdown. But those problems have been compounded by the protests, to which there seems to be no end in sight.

Numerous violent clashes between police and anti-government protesters, often at popular shopping and tourist areas in Hong Kong, have turned visitors off from the city. Tourist numbers plunged 37% year on year for the third quarter, and the trend for the last three months of the year isn't looking much better. The number of visitors to Hong Kong in the first half of October was down 50% compared to last year, Chan said.

Hotels are on average only two-thirds full, a drop of 28% compared to the same period a year earlier, according to Chan. Retail figures are also taking a beating, he said, as some shops have been forced to close early or shut down for a full day several times over the last few months.

Some protesters have targeted shops, restaurants and banks viewed as unsympathetic to their cause, smashing in windows, vandalizing storefronts with graffiti and even setting fire to some properties.

Last week, Chan announced a new round of economic measures to support businesses affected by the ongoing unrest, including slashing rents in half at properties leased by the Hong Kong government, and providing fuel subsidies for taxi drivers and fee subsidies for local ferries. Those plans follow on earlier initiatives, including the allocation of 2 billion Hong Kong dollars ($255 million) to support small companies and a 19 billion Hong Kong dollar ($2.4 billion) stimulus package to help safeguard jobs and provide relief to "people's financial burden."

Hong Kong's richest man, Li Ka-shing, earlier this month pledged to give one billion Hong Kong dollars ($128 million) to businesses hurt by the city's pro-democracy protests, saying at the time that the city's economy "is facing unprecedented challenges."

Despite the troubled Hong Kong economy, the city's financial markets largely appear to be holding up. The Hang Seng (HSI) Index is still up 4% for the year, and the political crisis hasn't been a deal breaker for investors yet, many of whom still see the city as an important gateway to Asia.

The IPO market is also proving resilient: In September Anheuser-Busch InBev (BUD) listed its Asia business on the Hong Kong Stock Exchange (HKXCF), raising $5 billion in the second biggest IPO of the year after Uber (UBER).

That deal pushed the amount of funding raised on the Hong Kong exchange to the third highest in the world this year after the New York Stock Exchange and the Nasdaq, according to Deloitte.
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