Hong Kong Retail Sector: A Strategic Rebound in 2024 Amid Macroeconomic and Currency Shifts

Hong Kong's retail sector has long been a barometer for global economic sentiment, and 2024 is shaping up to be a pivotal year. After a 14-month decline in retail sales, the sector is showing early signs of recovery, driven by easing interest rates, a stabilizing Hong Kong dollar, and renewed consumer demand. This article unpacks the forces behind this rebound and identifies undervalued equities poised to benefit from the shifting landscape.

The Macroeconomic Catalysts: Interest Rates, Currency Stability, and Consumer Demand

The Hong Kong Monetary Authority (HKMA) cut the base rate by 5% in November 2024, a move that has rippled through the economy. Lower borrowing costs have reignited demand in the residential property market, with transactions surging 30% quarter-on-quarter in Q2 2025. This liquidity is now spilling into retail, as homebuyers allocate budgets to home furnishings and renovation services.

Meanwhile, the Hong Kong dollar's stability against the U.S. dollar has been a quiet but critical tailwind. A firm currency has reduced the price differential between Mainland China and Hong Kong, making luxury goods and high-end retail more competitive. For example, jewelry and watch sales rebounded 22% year-on-year in Q2 2025, reflecting pent-up demand from mainland tourists and local buyers.

Consumer confidence, though still cautious, is improving. Employment earnings in Hong Kong rose 6.4% year-on-year in Q1 2025, and the government's tourism promotion campaigns—coupled with the removal of cross-border travel restrictions—have boosted visitor numbers to 85% of pre-pandemic levels. These factors are creating a virtuous cycle: stronger tourism → higher retail sales → improved business sentiment.

Retail Sector: A Tale of Two Trends

The retail recovery is uneven. While categories like clothing, cosmetics, and department stores saw double-digit growth in May 2025 (e.g., +7.1% for department stores), others like fuels (-6.9%) and furniture (-12.0%) remain weak. This divergence highlights the importance of sector-specific analysis for investors.

Online retail, which accounts for 8.3% of total sales, is also showing resilience. After a 3.7% decline in April 2025, online sales rebounded 0.3% year-on-year in May. This suggests that e-commerce platforms and omnichannel retailers are better positioned to weather macroeconomic headwinds.

Undervalued Equities: Where to Allocate Capital

1. Sino Group (0124.HK)

As a developer of upscale malls and residential complexes, Sino Group is a prime beneficiary of the wealth effect. With Hong Kong's property market stabilizing, the company's retail assets in prime locations like Kowloon and Tsimshatsui are seeing renewed demand from both mainland tourists and local high-net-worth individuals. The stock trades at a 30% discount to intrinsic value, reflecting its underperformance in 2023 but offering a compelling entry point as recovery gains traction.

2. Hutchison Port Holdings (0018.HK)

Logistics and infrastructure are the unsung heroes of retail recovery. Hutchison Port Holdings, a leader in container terminals and port operations, is positioned to benefit from the resurgence in intra-Asia trade. With Hong Kong's exports of goods rising 8.4% year-on-year in Q1 2025, the company's efficient port network is a critical enabler of retail supply chains. At a P/E ratio of 8.5x, it's a value play with strong cash flow visibility.

3. Residential REITs: Spring Real Estate Investment Trust (1426.HK)

The REIT sector is undervalued but offers high-yield opportunities. Spring REIT, with a share buyback program authorized for 10% of its issued shares, is signaling confidence in its net asset value. Its portfolio of commercial properties in high-traffic areas like Mongkok aligns with the “tenant reshuffling” trend, where affordable brands are outperforming traditional retailers. While earnings are projected to decline, the REIT's 5.8% dividend yield and insider buying activity make it a speculative but strategic bet.

4. MREIT (PSE:MREIT)

Though based in the Philippines, MREIT's omnichannel strategies and strong Q1 2025 performance (PHP 1.02B in sales) make it a compelling cross-border opportunity. The company's focus on mixed-use properties and digital integration mirrors Hong Kong's retail evolution. With a gross profit margin of 73.74% and leadership changes under new CEO Jose Arnulfo C. Batac, MREIT's adaptability to regional retail shifts is a key strength.

Risks and Watchpoints

While the outlook is cautiously optimistic, investors must remain vigilant. U.S. Federal Reserve rate hikes could reflate Hong Kong's linked interest rates, dampening property and retail demand. Additionally, geopolitical tensions—such as U.S.-China trade frictions—could disrupt tourism flows. Retailers with high exposure to discretionary spending (e.g., luxury brands) remain vulnerable to consumer caution.

Conclusion: A Calculated Bet on Resilience

Hong Kong's retail sector is at an inflection point. Easing interest rates, a stable currency, and strategic government initiatives are creating a foundation for recovery. For investors, the key is to target equities that align with these macroeconomic shifts—whether through property exposure, logistics, or omnichannel innovation. While risks persist, the undervalued opportunities in 2024 present a compelling case for those willing to navigate the complexities of this dynamic market.