Affluent consumers in Hong Kong and Singapore have severely cut back their spending in most luxury categories over the past four months, as concerns grow about the economic outlook for the year ahead.
With Singapore narrowly missing a technical recession and Hong Kong entering into one, research firm Ipsos has revealed that affluent consumers in both markets are adopting much more conservative spending behaviour, although the trend is more pronounced in Hong Kong.
The findings are set out in Ipsos’s annual Affluent Asia study, which is based on a survey of more than 24,000 people aged 25 to 64 across 11 countries.
Those selected for interview come from the top 18% of the population based on household income, rising to the top 31% in Singapore and the top 30% in Hong Kong.
Based on a survey conducted in early October, Ipsos compared spending patterns and sentiment with results from three months previously and concluded that, in both Hong Kong and Singapore, spending on quality spirits and wine, luxury watches, jewellery and designer clothes declined by at least 20%.
Across 12 luxury categories, only skincare saw modest spending increases in both markets – and there was also a small rise (4%) in spending on electronics and gadgets in Hong Kong – but there were steep declines in most of the others.
Furthermore, it appears the uncertain economic situation is prompting affluent consumers to rely less on credit and to keep hold of their cash, with 61% in both markets agreeing with the statement: “At times like this, I would keep a high level of liquidity for myself.”
The appetite for risk among Hong Kong affluent consumers has also diminished over the past few months, with only a third (36%) seeing themselves as ‘risk takers’, compared to 46% for the 12-month period to July this year. However, Singaporeans do not share this view and their appetite for risk remains stable.
Elsewhere, the survey further revealed that the proportion of Hong Kong’s affluent investing at home decreased by 23% between July and October, while investment in China (-14%), Europe (-10%) and other parts other parts of the world (-6%) also declined.
And looking ahead to their expectations about economic conditions in 2020, consumer confidence remains bleak. Consumers in both markets are overwhelmingly negative about Hong Kong’s economy next year – as well as for China’s economy and the rest of the world.
Although Hong Kong’s affluent, by a net positive score of ten, believe that Singapore’s economy will improve while Singaporeans (-31) disagree.
“Singapore narrowly averted a technical recession this year which makes Singapore business decision makers cautious,” said Katherine Zhou, managing director of Ipsos in Singapore.
“Businesses in Singapore have been relatively resilient, but because Singapore is a small country many companies depend on the neighbouring economies and we will inevitably be affected by instability in the region.”
Sourced from Ipsos; additional content by WARC staff