Chinese shoppers boost European stocks
“Boosted by the good results of the luxury sector, the Paris Bourse hit a new high every day” last week, says Sophie Rolland in Les Echos. Luxury conglomerates Kering, Hermès, L’Oréal and Louis Vuitton owner-LVMH jointly account for almost onequarter of the CAC 40’s total market capitalisation. The index has gained 14% this year.
“In a world coping with inflation, war and bank runs, it seems counterintuitive that demand for luxury is still running hot,” says Carol Ryan in The Wall Street Journal. European luxury stocks have gained 23% this year.
Meanwhile, Hermès saw its revenue grow by an annual 23% in the first quarter. The boom reflects strong demand as Chinese reopening triggers a shopping frenzy. The ultrawealthy are spending more than ever: “A wealthy shopper who shelled out around €50,000 in designer shops in 2019” would typically have “spent €135,000 in 2022”, according to investment research group Bernstein.
China-exposed sectors in the developed world such as luxury, commodities and semiconductors have outperformed the broader market over the past five years, says The Economist. “If you look at valuations in rich-world stockmarkets, you would never know relations between China and the West are at a 50-year low.” That is a reminder for investors that “foreign companies with Chinese exposure are still a much better way to benefit from Chinese economic growth than the domestic stockmarket”, which has long disappointed.
Yet the market’s refusal to apply any sort of geopolitical discount to China-exposed shares might still prove naive. “One of the two views – the increasingly bleak outlook of diplomats, or investors’ sanguine approach – will prove to be wildly wrong.”