Hong Kong’s potential curb on tourist arrivals from China may put pressure on the earnings and asset values of companies that own shopping malls in the city, according to some analysts.

Hysan Development Co. is among companies with the most earnings risk, Macquarie Group Ltd. wrote in a report dated yesterday. Bank of America Corp.’s Merrill Lynch & Co. cut Wharf Holdings Ltd. to neutral from buy on concern restrictions on mainland visitors may have a more-severe effect.

Hong Kong may need take steps to slow gains in tourist arrivals as an influx of mainland visitors stokes discontent, city Chief Executive Leung Chun-ying told reporters yesterday. The government is conducting studies and will seek public feedback, he said.

“For the remainder of his term until 2017, Leung will continue to put social needs and populism above GDP growth, as long as employment does not get severely” affected, Macquarie analysts led by Kai Tan wrote in the report.

Wharf and Sunlight Real Estate Investment Trust will suffer the biggest effect on their net asset values from falling Chinese tourist spending, Macquarie said.

Mainland visitors to Wharf’s malls account for about 50 percent of spending at Harbour City and about 35 percent to 40 percent at Times Square, Merrill Lynch analyst Karl Choi wrote in a research note yesterday. A worst-case scenario would see an 8 percent to 10 percent drop in sales if visitors’ spending were cut by 20 percent, cutting Wharf’s turnover rent, it said.

Clarity Awaited

It will be “difficult for Wharf shares to outperform until any policy change is implemented and the impact on retail sales clarified — a process that may take some time,” Choi wrote. “Once the dust settles after the next few months, we think investors may be willing to reassess.”

Wharf and Hysan both fell 3.5 percent in Hong Kong trading yesterday. Sunlight REIT slid 0.9 percent to close at HK$3.14. The benchmark Hang Seng Index was down 0.1 percent.

Public discontent over mainland visitors purchases of homes, designer handbags and daily necessities prompted street protests this year that demanded the government limit arrivals. Curbs on visitors in response may crimp city retail sales, about a third of which were to Chinese visitors in 2013.

Visitors from the mainland accounted for 75 percent of the city’s 54.3 million tourist arrivals in 2013, according to statistics from the government’s Tourism Commission

Tourist arrivals jumped 12 percent last year, the fourth consecutive year of double-digit gains. Mainland travelers accounted for 34 percent of Hong Kong’s retail sales last year, according to a May 8 research note from Merrill Lynch.

The Hong Kong government said earlier this year the city may have more than 70 million visitor arrivals in 2017. Tourism accounted for 4.5 percent of the city’s economy in 2011, according to a paper Leung discussed with a committee on May 26.

With assistance from Kana Nishizawa and Michelle Yun in Hong Kong.

To contact the reporters on this story: Billy Chan in Hong Kong at bchan101@bloomberg.net; Moxy Ying in Hong Kong at yying13@bloomberg.net; Vinicy Chan in Hong Kong at vchan91@bloomberg.net To contact the editors responsible for this story: Tan Hwee Ann at hatan@bloomberg.net Joshua Fellman, Niamh Ring.

Photo Credit: Shoppers are seen outside one of the biggest Parknshop Superstores, owned by tycoon Li Ka-shing, inside a shopping mall in Hong Kong July 25, 2013. Bobby Yip / Reuters