Reuters API Fashion
Dec 27, 2022
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China-addicted luxury stocks cheer Beijing''s looser COVID curbs

Reuters API Fashion
Dec 27, 2022

Shares in global luxury goods groups, which rely heavily on Chinese shoppers, rose on Tuesday after Beijing further relaxed some COVID restrictions that had been in place for the past three years, fuelling hopes of a full-blown reopening soon.


China will stop requiring inbound travellers to go into quarantine starting from Jan. 8, the National Health Commission said on Monday in a major step towards easing curbs on its borders, which have been largely shut since 2020.

News of the loosening lifted stock markets worldwide, with luxury shares in particular benefitting. Shares in LVMH , the world's biggest luxury group and Europe's number 1 company by market capitalisation, were up 2% while Cartier-owner Richemont rose 2.4%.

China, which is gradually moving away from a strict zero-COVID policy that battered its economy, kept consumers indoors and sparked a wave of public discontent, accounts for 21% of the world's €350-billion luxury goods market, behind North America and Europe.

But before the current slowdown, it had for years been the fastest growing region, with young, urban, middle class professionals in cities around China splashing out on Hermes' €10,000+ Birkin handbags and Gucci's €1,000 fur-lined loafers.

It is expected to become the top market for the industry by 2025 and already generates about 35% of annual sales at Gucci, French group Kering's star brand, 27% for rival LVMH's fashion and leather goods division and 26% for Hermes.

With Europe facing an energy crisis and the U.S. economy also cooling due to higher interest rates, China is looking to a recovery next year and the luxury world is hoping to take advantage of that.

According to a recent report by the McKinsey consultancy, while non-luxury fashion sales are expected to rise between 2% and 7% in 2023, luxury sales should climb 9% to 14% over the same period.

"China will likely remain a core market for fashion consumption in the long term, with significant untapped opportunities among a customer base whose sentiment for luxury brands in particular is holding strong," it said. 

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