Shares of exporter Li & Fung lost ground yesterday on renewed fears its profitability will be hammered by tumbling consumer demand in the United States the South China Morning Post reported.

The share fall - by two per cent to HK$12.25 - demonstrates once again the ill effects that the US economic slowdown is having on Hong Kong companies with heavy exposure across the Atlantic.

Li & Fung sources consumer products such as apparel, sports shoes and toys from cheaper regions, largely China, and exports them, mainly to the US.

Consumer demand in the US is showing signs of deteriorating on the back of mixed results of leading retailers announced yesterday. They also showed a shift in consumer spending from higher-end products to discounted items.

"Li & Fung has got to share the pain," Merrill Lynch analyst David Cui said. An analyst at a European brokerage said discounted prices in the US could hurt Li & Fung's profitability as its profit margin came under immense pressure.

She said this would exacerbate the company's declining profit margin, dragged down by recently acquired sourcing arm Colby International and a contract sourcing Disney products.


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