The strength of the retail environment in Hong Kong has been well documented, but the scale of shopping malls sprawling through large parts of the city is somewhat staggering. In the more central districts, product offerings tend to cater to the high-end crowd with luxury international brands apparent on every street corner.

Much of this demand for luxury items originates from mainland Chinese tourists who seem to be taking advantage of their continued wage growth while attempting to diversify their assets away from their domestic currency. However, what they purchase is not limited solely to watches, jewelry and other typically high-value goods.

The famous butter cookies at one independent bakery in the center of the city are a popular draw for both tourists and locals alike. Even when it's raining, I frequently see hundreds of people queuing up along the street. The cookies at this bakery, which cost as little as about US$8 a box at the store, resell online in China for a premium (almost three times higher during the recent Chinese New Year holiday) as some customers turn their wait time into profit. From street sellers hawking hats and gloves to restaurant wait staff suggesting alternative and pricier wine choices, the evidence of entrepreneurism echoes that of the cookie resellers.

Demand for products of all values will continue to be driven by Hong Kong's inherent love of shopping as well as from tourists, but another important factor in this buoyant market is a notable salesmanship. The motivation of Chinese sales staff is nothing short of impressive as they seem able to assist customers in Cantonese, English or Mandarin to upsell products at any given opportunity.

I detected this same resourcefulness and sales acumen during a recent trip to mainland China. Street vendors near tourist attractions in many countries will often offer to take your picture for a tip, but the ones I saw by the Bird's Nest stadium—the iconic centerpiece of the 2008 Beijing Olympics—were also offering hard copy prints. Retail remains big business in Hong Kong. Given the strong combination of the creativity and entrepreneurship of the people, combined with increasing disposable income that has led to more indulgent buying, we expect to continue seeing compelling investment opportunities.

Colin Dishington, CA

Research Analyst

Matthews Asia

The subject matter contained herein has been derived from several sources believed to be reliable and accurate at the time of compilation. Matthews does not accept any liability for losses either direct or consequential caused by the use of this information. Investing in small- and mid-size companies is more risky than investing in large companies as they may be more volatile and less liquid than large companies.

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