New Shenzhen multi-entry visa restrictions could cut visitor influx by up to 4.5m

The measures target trade abuse.

It has been noted that multi-entry visas to Hong Kong for Shenzhen residents could see new restrictions commencing in mid-April, according to i-cable news.

According to a research note from Barclays, it believes the measures target curbing parallel importers who sell the goods that were bought in Hong Kong in China.

The latest restriction will reportedly restrict entry to once a week; this could reportedly reduce visitors under the multi-entry visas by 30% (or by 4.5 mn visitors).

This 4.5 mn figure represents 10% of 2014 total mainland visitor arrivals to Hong Kong, and 16% of 2014 same-day mainland visitor arrivals.

Here's more from Barclays:

If the new restrictions are confirmed to be true, we believe there will negative impact to Hong Kong retailers, particularly the businesses that capture a majority of sales from same day visitors, such as cosmetics retailers, local pharmaceuticals, and daily goods retailers, especially in the New Territories.

Same-day visitors have been growing much stronger than overnight visitors. In 2014 and Jan/Feb 2015, same-day visitors were +19% y/y and +24% y/y respectively; vs overnight visitors which were only +12% and +4% y/y respectively for the same periods.

We believe most Hong Kong retail stocks would see some negative impact, but we believe the most impacted stock in our coverage will likely be Sa Sa, which has over the past few years expanded their network significantly in the New Territories to capture the growth in same-day visitors.

We have been expecting Hong Kong retailers to face continued challenges from:
1) divergence of mainland visitors to other countries as visitors look for diversified travel experiences, and as depreciation of currencies make travel to other places attractive (the euro area, Japan as examples); and
2) local protests against visitors impacting visitors’ sentiment towards travel to Hong Kong.
If this latest restriction comes through, it would serve as an additional and significant headwind and we believe could lead to sustained declines in Hong Kong retail sales.