Global consumers are under pressure.
From Investing.com
One critical sign, Hong Kong's fumbling retail sales. From the Nikkei Asia
Hong Kong's retail chill shows no signs of thawing in June, as overall sales fell for the 16th consecutive month on weaker local consumer sentiment and fewer visitors.
Retail sales slumped 8.9% on the year to 33.7 billion Hong Kong dollars ($4.34 billion), a decline from the 8.4% fall in May. In the first six months, total retail sales fell 10.5%, according to official data released on Tuesday.
The decline retail sales, as shown in the chart above, has signified a 5-year trend. Negative growth rates emerged during the 1Q of 2014. Importantly, the disturbing sign has been of the deepening scale of retrenchment in consumer activities.
Apparently, the retail woes and the recent decline in property prices has spread to infect bank profits.
As a side note, Hong Kong's property prices rebounded in the 2Q. But this more like a looks like a cyclical bounce.
Nevertheless, spreading losses now manifested in the big drop in bank profits of Hong Kong's the three major banks--as reported by the South China Morning Post
Three major banks in Hong Kong – HSBC Holdings, Hang Seng Bank and Standard Chartered – all reported sharp falls in their first-half profits on Wednesday as they were hard hit by the global economic slowdown and investment ¬market uncertainties.
The banks’ top executives and analysts warned of tough times ahead as the mainland economic slowdown would continue to cut loan demand and cause a rise in bad debts, while poor investment sentiment would put downward pressure on fee income.
HSBC, the city’s biggest lender and one of the world’s largest, said pre-tax profit dropped 29 per cent to US$9.71 billion, while revenue fell 10.5 per cent to US$29.47 billion, hurt by shrinking fee income from equities trading in Hong Kong and a slumping pound after Britain’s vote to leave the European Union.
At subsidiary Hang Seng Bank, net profit slumped 60 per cent as rising bad loans and lower fee income weakened a balance sheet that was helped in the year-ago period by a one-time gain. Excluding the gain, the bank’s profit was down 15 per cent.
Markets are a process. The declining trend in asset (property) prices, which are manifestations of balance sheet predicaments, and which has now been exacerbated by deterioration in economic activities will likely spread and increase on credit risks. And sustained negative feedback loop would lead to a financial storm.
The writing is on the wall.
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