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Businesses in Hong Kong warn of economy risks if protests continue

Vistitors to Hong Kong deterred by unrest drop

When mass demonstrations take place across Hong Kong for the tenth weekend in a row, companies that maintain Hong Kong’s economy warn that if the standoff remains.

Managers from some of the significant businesses in Hong Kong announced provisional outcomes last week and raised alert about the risk of potential income from protests that often resulted in brutal conflicts with the authorities.

Clement Kwok King-man, Chief Executive Officer of Hong Kong and Shanghai Hotels, operating the Peninsula Hotel, even proposed the “greater financial sustainability of Hong Kong.”

Violence wiped out again this summer by authorities shooting lacerating petrol to remove demonstrators barricaded by highways. The demonstrations have led to worldwide news, guiding tourists to remain back from Hong Kong.

Rupert Hogg, CEO of Cathay Pacific Airways, said Wednesday that the incoming reservations in Hong Kong were partly due to latest demonstrations. The impact of disturbances has yet to demonstrate in income–Hong Kong’s major company jumped to 1,35 trillion dollars (172 million dollars) of net gain in the first six months of 2019, compared to the net losses of 263 million dollars a year ago when hitting the elevated petroleum rates.

But for the second quarter, the decrease in tourists is sick. Hogg said the debate on “what countermeasures Cathay will bring” was “fairly late.” Hogg did not leave out any chance of cutting fare rates that could add to income.

Worse still, Chinese aircraft agency released a security hazard alert for the aircraft company on Friday evening, stating a link to the demonstrations to the participation of a member of the Cathay Pacific team in “unlawful operations.” Local press claims that continental inhabitants and businesses are being called upon to boycott Cathay.

The airline banned a pilot detained during anti-government protests in Hong Kong and shot two airport workers on Saturday alleging negligence. It also said it bars “too radical” crew members from continental crew aircraft.

Cathay Pacific shares dropped by more than 4% on early trading on Monday to nearly ten years.

The hotel industry also feels pinched. In Hong Kong and Shanghai Hotels, demonstrations have aggravated an already challenging scenario as a result of the trade conflict between the USA and China with income from Hong Kong’s prime store in Ritzy Tsim Sha Tsui dropping 7% in the first quarter, and the occupancy level fell 7%. Saturday evening was another brutal conflict in the neighbourhood of the hotel.

About the perspective for the remainder of 2019, Kwok said: “We are worried about the impact of the political ambiguity on our outcomes, in particular, considering the percentage of our revenue gained in Hong Kong.” According to the local Minister of Trade and Economic Development, Edward Yau Tang-wah, tourist numbers started to decline daily by mid-July and continue to deteriorate.

At a news conference Thursday, he said, a decrease in the figure of 31 per cent year on year in mid-August, while hotel occupancy in July was “certainly a double-digit fall.” Australia and the United States have lately upgraded their consultation rates. On Friday the state’s spokesperson made a declaration stressing that the country welcomes both visitors and shareholders and stays’ a secure location for travellers from around the globe.’ CEO Jacob Kam Chak-Pui said a media meeting Thursday that the MTR’s rail and entertainment centre provider faced the’ most difficult task’ of offering secure and trustworthy facilities over 40 years.

The turmoil has influenced the people’s “willingness to go out or eat,” said Kam, who said: “The general economy has been influenced. I’m confident there will be an effect on us.” Wharf Holdings, Harbor City Owner and Times Square, two of Hong Kong’s biggest shopping centres, have issued reports that police agents are prevented from joining their properties.

Meanwhile, the Hong Kong Real Estate Developers Association released a combined declaration on Thursday criticising “tiny band of brutal protestors ‘ radical behaviour” to disrupt the government process.

The statement was co-signed by seventeen significant developers in the city, including CK Asset Holdings, Henderson Country Development, New World Development and Sun Hung Kai Properties, as well as Hang Lung Properties. One day, after a conference held in the neighbouring Shenzhen mainland to warn Hong Kong publics via pro-Beijing lawmakers and business elites, the top Beijing official in charge of Hong Kong affairs.

Chief Executive Officer Carrie Lam Cheng Yuet-Ngor, Hong Kong’s president, compared the impact of economic demonstrations on Friday to a “typhoon” impact, and “worsened” the effect from the severe acid breathing syndrome (SARS, a 2003 outbreak), and the global financial crisis in 2008.

Lam was immediately accused of exaggerating the brunt of the protests by her critics. Claudia Mo Man-ching, a Pan-Democrat legislator, denied Lam “scarring out” the individuals. Mo’s former government legislator and a budget consultant, Kenneth Leung Kai-Cheong, criticised the slowdown in existing problems and called Lam’ irresponsible.’

But there seems to be bleak fog collecting over Hong Kong. The continuing demonstrations are putting slight stress on an industry fighting the headwinds of a trade conflict between the United States and China and the stalled growth of the continent. In the three months ending June, Hong Kong experienced an economic contraction of 0.3 magnitudes on a quarter-on-quarter basis.

“If the state decides to toughen its position towards demonstrators, the adverse financial effect of economic sanctions against Hong Kong could be increased,” said Kevin Lai, Chief Economist at Daiwa Capital Markets in Hong Kong. “There is also a longer-term danger of investment outflows and blood leak,” he clarified.

Because the second half only represented three-quarters of influence, Lai is confident that “the instant effect of demonstrations will be much higher” in the latter half. This implies that another contraction is “very probable, and therefore, a recession is necessary.”

 

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