(Reuters) – Luxury goods stocks rose on Tuesday, buoyed by stimulus measures in China, a key market for the sector, which had recently suffered from the Asian giant’s gloomy outlook.
In Paris, the LVMH, Kering, Hermès and L’Oréal groups are up between 5 and 3% around 07:43 GMT, among the biggest increases in the CAC 40, which is up 1.25% at the same time.
Elsewhere in Europe, Richemont, Burberry and Ferragamo are up around 4%.
The luxury sector index on the Stoxx rose by 2.3%.
The People’s Bank of China (PBOC) on Tuesday announced massive monetary stimulus and support for the property market to revive the economy, which has been struggling with severe deflationary pressures.
China’s economy, struggling with sluggish domestic demand and a lingering real estate crisis, grew much more slowly than expected in the second quarter, and uncertainty about the economic outlook is weighing on the middle class and prompting caution among the wealthy, hurting luxury stocks.
RBC analysts, who note that the Chinese economy continues to suffer from weak consumer confidence and that PMIs point to contraction and moderate spending, nevertheless believe that the sector could soon bottom out and that the stimulus measures are a positive sign in the short term.
“We believe we are approaching the bottom of the luxury cycle, which could occur in the next 3-6 months (likely late 2024 or early 2025) based on our current forecasts, and assuming no material worsening of luxury demand trends in China,” RBC analysts wrote in a note published Tuesday.
The broker also says it has observed a slight positioning of investors on European luxury stocks and has received a certain number of requests from “long only” investors who have started to become less negative in recent weeks.
According to RBC, Chinese stimulus measures should support Swatch Group, Burberry and Richemont in particular, which are most exposed to revenues from the world’s second-largest economy.
(Written by Diana Mandiá, edited by Augustin Turpin)
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