Luxury stocks linked to China are celebrating as Beijing eases COVID restrictions, providing a boost to global luxury goods companies heavily reliant on Chinese shoppers. The recent announcement from China’s National Health Commission stating that inbound travelers will no longer be subject to quarantine measures has raised hopes of a complete reopening in the near future. This positive development has led to a surge in stock markets worldwide, with luxury shares performing particularly well. LVMH, the world’s largest luxury group, witnessed a 2% increase in its shares, while Richemont, the owner of Cartier, experienced a 2.4% rise.
China, which has gradually shifted away from its strict zero-COVID policy, represents a significant portion of the global luxury goods market, accounting for 21% of the €350 billion industry. Although China fell behind North America and Europe in terms of market size, it had shown robust growth and had become the fastest-growing region for luxury goods sales in recent years. The emerging young, urban, middle-class professionals in Chinese cities were contributing to this surge by splurging on luxury brands, from high-end handbags to exclusive footwear. It is expected that China will become the leading market for the luxury industry by 2025, already driving a substantial portion of the annual sales for luxury giants such as Gucci, LVMH, and Hermes.
With Europe’s energy crisis and the cooling of the US economy due to rising interest rates, China is poised for a recovery in the year ahead. The luxury industry is hopeful that it can capitalize on this market rebound. A recent report by McKinsey consultancy predicts that luxury sales will see a significant increase of 9% to 14% between 2022 and 2023, compared to a more modest growth rate of 2% to 7% for non-luxury fashion sales. The report emphasizes the long-term potential of the Chinese market, stating that there are still untapped opportunities among Chinese consumers who have a strong sentiment for luxury brands.
Useful links:
– Reuters: China Stocks Rise as Luxury Sectors Get Boost from COVID Restrictions Ease
– Bloomberg: China Buyers Drive Diamonds to Pre-Covid Sales in Singapore Speed
