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HK sees no rise in retail value in 2000

HONG KONG: The Hong Kong Retail Management Association expects no increase in the value of retail sales this year, saying price deflation should offset a slight rise in sales volume.

"Assuming the trend carries through from the fourth quarter, we expect retail sales volume to continue to inch up in 2000 ... maybe three to five percent," Philip Ma, chairman of the association, told Reuters in an interview. "But due to the deflation factor in Hong Kong, the value, I think, will still be just the same as 1999," he said.

Hong Kong's retail sector was shattered by the Asian economic crisis, which struck in late 1997. Deflation was at 4.2 percent in November, offsetting a rise in sales volume in the fourth quarter as the economy improved.

Volume rose 4.8 percent in November from the same previous year period, but the value of sales fell 2.8 percent due to deflation.

"For the whole year (1999), we should see a slight decrease in volume, probably two or three percent," Ma said. "Value, we should register an eight to 10 percent drop due to deflation."

He predicted deflation would end this year as the economic recovery gathered momentum.

"I'd like to think that the worst of the situation is over and we are waiting for a more apparent recovery," he added.

SALES TAX WOULD HURT

Ma, who is also group managing director of department store chain Sincere Co Ltd 0244.HK, said a sales tax in the territory would stall the retail sector's comeback.

He made the remark amid speculation that the territory might introduce a sales tax when the 2000/2001 budget is unveiled on March 8. Hong Kong leader Tung Chee-hwa has said a sales tax is being studied and a decision will be made by March.

"For over 30 months now, the retail sales value in Hong Kong has been dropping. Only in the past couple of months did we see slow signs that it's levelling off," Ma said.

"If we now talk about a sales tax, it will kill or postpone any chance of recovery," he said. "Retailers in Hong Kong are dead set against the sales tax issue."

While an expected economic upturn will buttress retail business this year, Ma said sales would still be plagued by high unemployment and frayed consumer confidence.

"Unemployment is still at a historic high level. It's been running at about six percent, compared with about two and a half to three percent (before the economic crisis).

"Even the employed have not got a salary increase for some time. So that affects their confidence," Ma said.

The price war which started last year among supermarket chains and a grocery delivery chain had affected the business of other retailers.

"The supermarket business has gone up as a proportion of the total retail business. It takes away (sales) from other sectors, for example, some department stores." he said. "I really don't know when this price war will end."-Reuters