Morgan Stanley: Hong Kong retail sales expected to rise 4% year-on-year in October, WHARF REIC (01997) and HYSAN DEV (00014) may benefit.

Morgan Stanley released a research report stating that Hong Kong's retail sales in September increased by 5.9% year-on-year to 31.3 billion yuan, higher than the bank's forecast of 2% growth and the market consensus forecast of 2.6% growth. The recent positive growth in the past few months may indicate that the market is bottoming out. Morgan Stanley said that the cumulative retail sales decline for the first nine months of this year narrowed further to a year-on-year decrease of 1%. The bank raised its full-year forecast to a year-on-year decrease of 2%, compared to the original forecast of a 5% decline. Although mainland visitor arrivals increased by 11% in October, the increase in outbound tourism in the fourth quarter and rising unemployment rates may affect consumption. Therefore, Morgan Stanley maintains a conservative stance. Morgan Stanley believes that retail real estate investment trusts (REITs) such as WHARF REIC (01997) and HYSAN DEV (00014) may benefit, with dividend yields ranging from 1.7% to 2.7%, higher than the yield on US 10-year treasury bonds. Morgan Stanley predicts that Hong Kong's retail sales in October will increase by 4%, mainly driven by an increase in visitor numbers during the 8-day National Day Golden Week holiday, but partially offset by increased public holidays leading to more outbound tourism.