Uddrag fra Zerohedge:
Chinese state media this week said President Xi Jinping offered an outline for “common prosperity” via “wealth redistribution” – who know that China was communist after all – that includes income regulation and redistribution, putting China’s wealthiest citizens on notice. Among the biggest losers were Richemont -5.6%, Kering -5.3%, LVMH -4.2%, Swatch -3.6%, Burberry -2.7%, Hermes -2.2%. Hong Kong-listed Prada plunges 10%.
While there are currently limited details on how to address wealth disparity in mainland China, it’s “no secret that wealth disparity is supportive to luxury demand,” HSBC analyst Erwan Rambourg wrote in emailed comments. Rambourg sees hard luxury companies such as Swatch and Richemont as most exposed to Chinese demand, and Burberry and Prada among soft luxury players.
Luxury’s declines play into both China fears and overall re-opening as the delta variant spreads, as tourism purchases often are a big source of revenue.
Regionally, the luxury selloff is feeding most into the CAC 40, by far today’s biggest regional decliner in Europe. LVMH is the French gauge’s biggest member and is responsible for almost 30% of today’s drop in terms of index points. Luxury as a pain point will make it harder for the CAC, the best-performing major Western European benchmark this year, to hit its 21-year high
Courtesy of Bloomberg, here’s a roundup of what analysts are saying:
HSBC analyst, Erwan Rambourg
- While there are currently limited details on how to address wealth disparity in mainland China, it’s “no secret that wealth disparity is supportive to luxury demand”
- Sees hard luxury companies such as Swatch and Richemont as most exposed to Chinese demand, and Burberry and Prada among soft luxury players
JPMorgan, Grace Smalley
- Plans for wealth redistribution in China represents an “incremental risk” to the strong recovery in the luxury sector so far
- Swatch and Burberry are among the most exposed to the Chinese consumer; watches are “a product category most likely exposed to decreased displays of wealth”
UBS, Zuzanna Pusz
- Ongoing China concerns could weigh on the luxury sector in the near term
- Swatch has an estimated ~50% exposure to Chinese consumers pre-Covid, Burberry ~40%, Richemont ~40%, Hermes ~35%, Prada ~35%, Kering ~33%, LVMH ~31%
- Sees Hermes and LVMH as the “most defensive names in the sector”
Citi, Thomas Chauvet
- Recent comments by Xi Jinping about the need to redistribute wealth more equally could hurt high-end consumption if higher taxes were introduced on income, wealth, property or consumption
- Swatch Group, Burberry, Richemont, Kering and Prada are the stocks most exposed to Greater China
