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HK tourism plunges 40% in August, the most since SARS crisis

Retail and hotel industries also hit; economy contracted 0.4% in Q2, raising prospect of a technical recession

Hong Kong

THE ongoing protests in Hong Kong, now in their 15th week, have delivered a blow to the city's tourism industry not seen since the 2003 SARS epidemic.

Tourist arrivals in the city declined almost 40 per cent in August from a year earlier, Financial Secretary Paul Chan wrote in a blog post on Sunday. That's the biggest year-on-year decrease in visitor numbers since May 2003, when arrivals sank almost 70 per cent in the midst of the disease outbreak that ultimately claimed hundreds of lives in the city, according to data compiled by Bloomberg from the Hong Kong Tourism Board.

"Social issues in the past few months, especially the continued violent clashes and blockading of airport and roads, have seriously impacted Hong Kong's international image as a safe city," Mr Chan said in his post, which was written in traditional Chinese. "The most worrying thing is that the situation is not likely to turn around in the near future."

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The city's tourism, retail and hotel industries have been particularly hard hit, Mr Chan said. Occupancy rates of hotels in some districts fell more than half while room rates decreased 40 per cent to 70 per cent. Many meetings and business trips have been postponed or moved to other places, he said.

The protests, which morphed from opposition to a proposed extradition law to a broader challenge against Beijing's authority, have placed a growing toll on the city's economy. Retail sales by value dropped 11.4 per cent in July, the first full month affected by the protests, while sentiment among small businesses has hit record lows. Hong Kong's economy overall contracted 0.4 per cent in the second quarter from the previous period, raising the prospect of a technical recession.

The protests show few signs of resolution despite Chief Executive Carrie Lam's decision last week to formally withdraw the extradition bill that sparked the movement in the first place.

Based on August 2018 tourism figures, a 40 per cent drop would result in about 3.5 million visitors, the lowest level in more than seven years.

Hysan Development Co and Wharf Holdings Ltd, which operate malls in Causeway Bay, closed down more than 1.5 per cent on Monday after police fired tear gas in the district on Sunday night. Wynn Macau Ltd slid 1.1 per cent and hotel operator Shangri-la Asia Ltd lost 2.7 per cent. MTR Corp fell 0.4 per cent after protesters again vandalised a number of train stations. The MSCI Hong Kong Index slipped 0.1 per cent.

Retailers are making plans to ride out the disruption. Sa Sa International Holdings Ltd, a cosmetics retailer, has asked some managers in its back office to take no-pay leave for as many as four days each month from September, Ming Pao reported on Monday, citing people familiar with the matter. Sa Sa shares dropped 3.9 per cent.

Hundreds of uniformed school students, many wearing masks, formed human chains in districts across Hong Kong on Monday in support of anti-government protesters after another weekend of clashes in the Chinese-ruled city.

Metro stations reopened after some were closed on Sunday amid sometimes violent confrontations, although the mood in the Asian financial hub remained tense.

Early on Monday, before school started, rows of students and alumni joined hands chanting "Hong Kong people, add oil", a phrase that has become a rallying cry for the protest movement.

"The school-based human chain is the strongest showcase of how this protest is deep rooted in society, so deep rooted that it enters through the school students," said Alan Leong, an alumnus of Wah Yan College in the city's Kowloon district. BLOOMBERG, REUTERS