(News Bulletin 247) – Shares in the sector are falling, penalized by investors’ disappointment over the absence of new announcements from Beijing. Spirits groups are weighed down by China’s introduction of security deposits on imports of European spirits, particularly cognac.

After having carried the markets in recent weeks, China is this time causing heavy sell-offs on the Paris Stock Exchange.

Luxury values ​​are thus going through a zone of turbulence. Kering lost 5.8%, showing the biggest drop in the CAC 40, LVMH lost 4.3% and Hermès lost 2.7% around 10:10 a.m.

These clearances are linked to the absence of good news from China. The National Development and Reform Commission, a planning body in the country, held a press conference at 10 a.m. local time.

Ahead of this meeting, the markets speculated on potential new measures to support the Chinese economy, after initial announcements two weeks ago. Investors particularly hoped for tax measures to boost household consumption. A sign of these expectations, luxury rose well on Monday: Kering gained 4.6%, LVMH gained 2.7%.

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A disappointed market

“But ultimately there were no new announcements at this conference. “Zheng Shanjie, head of China’s National Development and Reform Commission (NDRC), did not give further details on the form and the scale of the tax aid announced”, notes Deutsche Bank.

“For two weeks, the first stimulus measures in China have given some hope to the luxury sector. And the market has begun to hope for further announcements. Last week, a leading economist in China said that the country had the room to increase its fiscal support by issuing up to 10 trillion RMB ($1.4 trillion) in special debt, which raised high expectations in the markets,” said Jie Zhang, an analyst at the independent design office Alphavalue

“But during the press conference this Tuesday morning, there was no this stimulus and not too many additional measures. The market got nothing and is therefore logically disappointed,” she continues.

China is a key region for luxury groups, and Chinese household spending remains very important for their growth. Bank of America estimates that these expenses, in their entirety, represent around 30% of luxury groups’ revenues. In addition, over the last 20 years, luxury has shown annual global growth of 9% per year and the American bank estimates that Chinese consumers contributed 40% to this growth.

China carries out its attack on cognac

Apart from this press conference which caused a stir, another element could weigh down both luxury and especially spirits groups: the introduction by China of measures penalizing European spirits (brandies). , like cognac.

“The Chinese government has imposed the posting of a customs bond on European brandies, and unsurprisingly Rémy Cointreau and Hennessy are the most penalized. It should be remembered that Chinese cognacs represent around 0.7% of LVMH’s revenues and that the group’s spirits division is the most profitable after leather goods,” explains Jie Zhang. “That’s a bit too much bad news,” concludes the analyst

Remy Cointreau, a cognac specialist, plunged 8.3% on the Paris Stock Exchange, while Pernod Ricard, which owns Martell, lost 4.1%.

“Remember that cognac in China weighs, in proportion to turnover, three times more at Remy Cointreau (25% of group turnover) than at Pernod Ricard (8% to 9% of group turnover )”, Pierre Tegner explained to News Bulletin 247 in May.