Hong Kong retail sales growth dipped 3.9% in December

Jewellery and watches sales dropped.

It has been noted that Hong Kong retail sales were soft in December at -3.9% y/y.

According to a research note from Barclays, most discretionary segment sales saw single-digit growth, with jewellery and watches declining.

Barclays noted that it sees some temporary reasons behind the softness, such as the later timing of Chinese New Year, weaker sentiment following protests, and tourists preferring to travel to other places for December.

However, Barclays still sees reasons to expect slow growth into 2015.

Here's more from Barclays:

December Hong Kong (HK) retail sales trends were soft but Chinese overseas spending trends were strong. We believe price differentials in HK are not particularly attractive and visitors are spending elsewhere.

We believe slow growth could continue throughout most of 2015. We cut our 2015 earnings estimates for HK retail stocks by 2-3% (except for Trinity, which we cut by 28%).

We still expect mid to high single-digit earnings growth for most HK retailers, but we see most stocks as fully valued: we reiterate our Equal Weight ratings on Sa Sa, Lifestyle, Chow Tai Fook; we downgrade Trinity to Equal Weight from OW; we rate Luk Fook Overweight for its cheap valuations.

Our preferred stocks are the global retailers L'Occitane and Samsonite (both rated OW), as we believe they are more immune to soft HK trends.