Asia Gold-SARS travel warnings deepens HK jewellers' gloom
Tue April 29, 2003 07:05 AM ET
By Kathleen Kearney
HONG KONG, April 29 (Reuters) - Travel warnings and restrictions aimed at stopping the spread of the flu-like SARS virus have added to the gloom for Hong Kong's jewellery manufacturers and retailers, bullion dealers said on Tuesday.
Gold offtake, which had already been in a slump as consumers across the region tightened spending this year, has come to a near standstill in many parts of East Asia in the wake of travel warnings by the World Health Organisation and governments.
"Hong Kong (jewellery) retailing is nearly dead," said Elison Chu, senior manager at Standard Bank London in Hong Kong.
"One of my clients said that sales were down 50 percent in April and could fall by 70 percent in May," Chu said.
Hong Kong's jewellery demand is 25 tonnes of gold per year, according to the World Gold Council, but local manufacturers aim to get a bigger piece of China's demand of more than 200 tonnes per year. China is the largest consumer of gold in East Asia.
Severe Acute Respiratory Syndrome (SARS) has hit mainland China and Hong Kong the hardest but deaths from the disease have also been reported in Singapore, Vietnam, Thailand, Malaysia, the Philippines and Taiwan.
Vietnam was taken off the WHO list on Monday, but businesses in all affected areas fear it will be some time before travellers return in any significant number.
Many jewellery makers had begun building inventory in late March and early April in preparation for an influx of tourists from other parts of China for the week-long May Day holiday.
Beijing authorities, who were initially reluctant to reveal the extent of the spread of the disease, have taken decisive and comprehensive measures in the past two weeks.
The government announced that the May Day holiday week would be shortened and banned travel by Chinese residents and foreign tourists to many areas of the country, both those heavily affected and those that are SARS-free.
GUANGDONG TRAVEL BAN
Most detrimental to Hong Kong retailers is a ban on all travel in and out of neighbouring Guangdong province. Tourists from the mainland account for the bulk of Hong Kong's visitors and they enjoy buying jewellery during their visits.
"Some jewellery manufacturers who used to buy or place orders with us on a daily basis haven't called for nearly three weeks," said a dealer with a Hong Kong bullion house.
Hang Fung Gold Technology Group , one of Hong Kong's smaller but growing jewellery manufacturers, had recently opened a third showroom to cater to tour groups that came to view the company's famous gold bathroom as well as buy jewellery.
"We have not closed any showrooms, but we have asked 80 percent of our staff to take their accumulated leave at this time," said company spokeswoman Vivian Lai.
As of Tuesday, sales were down between 50-60 percent in April, Lai said.
Tourists from mainland China accounted for 41 percent of 16.57 million visitors to the territory in 2002 and an estimated 42 percent of tourist spending of HK$62 billion (US$7.9 billion).
In line with previous years, retail sales in Hong Kong picked up sharply in December and January ahead of the holidays, then slumped again in February.
Jewellery sales tracked the same trend, but the most recent figures showed sales were still lagging year-ago spending trends.
In January, sales of jewellery, watches and other valuable gifts totalled HK$2.07 billion, a 4.1 percent jump over the year-ago month.
But in February, sales fell back to HK$1.59 billion, down 7.4 percent compared with year-ago period. (US$1=7.8 HK dollars)
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