Hong Kong's half year of anti-government protest has hit the territory's stores like never before.
Fresh figures released on Monday show that Hong Kong's retail sales fell 24.3% in October, compared with last year. That is the largest one-month decline on record.
The October figures take the 10-month tally in 2019 to a 9.0% decline over the same period in 2018. The government warns that it will likely run a budget deficit for the first time in 15 years for the fiscal year through March, and that the unrest has shaved about 2% off Hong Kong's economy.
The biggest "victims" are the luxury goods purchased by mainland Chinese shoppers. Watch and jewelry sales plummeted 42.9% in October, while cosmetics fell 33.5%. It is the tourist yuan that's on the slide; supermarket sales actually rose 0.5%.
High street restaurants have also suffered dramatically, and there are a few stocks worth watching as a result. Sales in food and drink establishments dipped 11.6% in October compared with the same time last year.
Hong Kong had a peaceful last week, following district council elections on Nov. 24 that delivered a landslide for pro-democracy candidates. Then this weekend, since the government has done nothing in response, the demonstrations began again. Tear gas once more wafted down streets, as three authorized marches took place. That included one "thanksgiving" parade thanking the United States for passing two laws aimed at protecting rights in Hong Kong.
Workers in Central, Hong Kong's Wall Street, have been organizing a series of lunch-time protest gatherings called "Lunch With You." Hundreds of office employees gathered today over the course of two hours in Chater Garden in the heart of downtown. Unlike the black-clad, masked protesters at the front lines of the more-intense demonstrations, most of these demonstrators came in business attire.
The lunch-time gatherings are due to continue all week. The Sunday "thanksgiving" march involved a stroll through the heavily touristed Tsim Sha Tsui peninsula, where Hermes, Ferragamo and Dior stores are the order of the day. Many of the outlets closed early for the day.
Demonstrators have smashed up the outlets of companies that they believe have tight ties with the mainland. The most high-profile target of the protesters has been Maxim's Caterers, Hong Kong's largest restaurant group. It owns banquet-style Chinese restaurants, the Genki Sushi conveyor-belt chain, Jade Garden Shanghainese restaurants, bakeries, and has the Starbucks (SBUX) franchise in Hong Kong.
Maxim's operates around one in every seven restaurants in the city, and accounts for 13.5% of total restaurant receipts, per a calculation by shareholder activist David Webb. It has become a target due to the outspoken comments of Annie Wu, the daughter of one of Maxim's founders.
Wu has spoken before the United Nations Human Rights Council in condemnation of the protests. She doubled down on that criticism when she told the Global Times newspaper that she has "given up hope" with young demonstrators, and that she "will not waste my time talking to them, as they have no idea what they are doing."
"I think we have lost two entire young generations," Wu told the pro-Beijing newspaper.
Maxim's is unlisted, but has dealings with listed entities that have become targets themselves. Maxim's Caterers is a joint venture between the Wu family's unlisted and the food company Dairy Farm International Holdings (DFIHY) SG:D01. Dairy Farm has a host of businesses that, if not vandalized directly, "yellow ribbon" pro-democracy advocates may avoid frequenting.
Dairy Farm is listed both in Singapore and, through its ADRs, in the United States. It in turn is part of the Jardine Matheson (JMHLY) LON:JAR group, one of Hong Kong's oldest British-run trading firms, known as hongs. Jardine's made its initial fortune partly through opium trafficking out of its base in Guangzhou. So it has had a testy relationship over almost two centuries of dealing with Beijing. Ahead of the 1997 handover of Hong Kong from Britain to China, it switched its main listing from Hong Kong to London, with subsidiaries such as Dairy Farm listed in Singapore instead of Hong Kong.
But Jardine's outlets are tainted by association with Maxim's, in the eyes of protesters. This means that there's a half-hearted boycott of the supermarket chain Wellcome, as well as 7-Eleven stores that are operated as a franchise by Dairy Farm. "Yellow ribbon" supporters pop into Circle K instead. Jardine's also controls the property developer Hongkong Land (HNGKY) , which has the largest portfolio of high-end office space in Central. One of their tenants is the company, Hong Kong Exchanges and Clearing (HKXCY) , that operates the stock market. So by extension even the Hang Seng should be off-limits. It's a long list ...
Besides Maxim's, the other major budget eateries in Hong Kong are owned by Café de Coral Holdings HK:0341 and Fairwood Holdings HK:0052. Though they are not particular targets of the protests, they are suffering as people eat out less, and because they have a lot of outlets in Hong Kong's most-densely-populated parts of town, the site of most marches.
Café de Coral, which shares a name with its main cheap-eats restaurants, saw a huge mid-year rally in its shares undone by the continued unrest. Between May 29 and July 26 the shares zoomed up 40.8%. That took them to their highest point since early 2017. They've slid particularly sharply since September, down 25.2%, to surrender virtually all those gains.
Similarly, Fairwood has seen its shares fall 27.4% since the summer. All these stocks will be worth watching for a rally should the protests seem to be nearing some kind of peaceful conclusion. McDonald's (MCD) also has mainland ties: its Hong Kong and Chinese businesses are 52%-owned by the Chinese state-owned conglomerate CITIC Group (CTPCY) .
The Japanese restaurant chain Yoshinoya T:9861 was one of the targets as the demonstrations grew violent on Sunday. The owner of the company that runs the Hong Kong franchise has spoken in support of the police and is known for his pro-Beijing views.
Stores from the discount dry-goods food chain Bestmart 360 HK:2360 have also been smashed up. Bestmart said in October that about 60% of its stores had been vandalized. It denies protesters' claims that it is linked to organized crime figures from Fujian.
Bestmart, the second-biggest snack retailer in Hong Kong, went public in January. Its shares shot up from the HK$1 listing price to HK$4.53 in early May. But they have been hit hard since the protests began, now standing at HK$2.24: still a hefty profit for those who bought shares in the offering, with potential for a further fall.