Written by 4:00 pm Europe Economy

Luxury goods shares cheer PRC’s looser curbs

Shares in global luxury goods groups, which rely heavily on Chinese shoppers, rose yesterday after Beijing further relaxed some COVID-19 restrictions that had been in place for the past three years, fueling hopes of a full-blown reopening.

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

News of the loosening lifted stock markets worldwide, with luxury shares in particular benefiting. Shares in LVMH Moet Hennessy Louis Vuitton SE, the world’s biggest luxury group and Europe’s No. 1 firm by market capitalization, were up 2 percent, while Cartier-owner Richemont SA rose 2.4 percent.

Photo: Reuters

China, which is gradually moving away from a “zero COVID-19” policy that battered its economy, kept consumers indoors and sparked a wave of public discontent, accounts for 21 percent of the world’s 350 billion euros (US$372 billion) luxury goods market, behind North America and Europe.

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 euros-plus Birkin handbags and Gucci’s 1,000 euros fur-lined loafers.

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

With Europe facing an energy crisis and the US 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.

While non-luxury fashion sales are expected to rise between 2 and 7 percent next year, luxury sales should climb 9 to 14 percent over the same period, according to a report by the McKinsey & Co consultancy firm.

“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,” the McKinsey & Co report said.

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