Luxury Stocks Soar as China Unveils Economic Boost: Hermes, Richemont, LVMH Surge 15%
Staff Editor Luxury Brands Surge as China Announces Economic Stimulus
European luxury stocks experienced a significant boost following China’s announcement of economic stimulus measures. Shares of high-end brands such as Hermes, Cartier-parent Richemont, and LVMH saw increases of over 15%, reflecting investor optimism about the potential revival of luxury spending in China.
The surge comes as Hermes reported a record operating margin, reaching its highest level since the company’s listing in 1993. This impressive performance was primarily driven by strong demand for Hermes’ hand-crafted leather goods and printed silk scarves.
Three top Chinese officials unveiled a broad set of economic measures, including interest-rate cuts, liquidity support, and lower bank reserve requirements. The announcement led to a widespread surge in stocks, with the luxury sector being a notable beneficiary.
Before this development, European luxury stocks had been struggling due to weak demand in China. Despite rising disposable incomes, Chinese consumers had shown reluctance to spend, with retail sales growth of 2.1% falling short of the forecasted 2.5%. Recent quarterly earnings reports from luxury brands highlighted these challenges, with Burberry reporting a 21% decline in mainland China sales and Hugo Boss describing the Chinese market as “particularly challenging.”
Bank of America analysts had recently cut price objectives on luxury stocks by approximately 20% and downgraded several to neutral or underperform status. Their analysis noted consumption weakness across the US, EU, and China, with some positive signs in the US but indications that China’s weakness was just beginning.
A shift in Chinese consumer spending patterns has also been observed, with a growing preference for luxury purchases abroad, particularly in Japan due to the weak yen. This trend has impacted domestic luxury spending in China.
Investors are now hopeful that the announced stimulus measures will reinvigorate luxury spending in China, a crucial market for high-end brands. As the situation unfolds, the luxury sector will be closely watching for signs of increased consumer confidence and spending in the world’s second-largest economy.
