(News Bulletin 247) – Shares in the luxury sector are falling, while the latest stimulus measures announced by Beijing on Saturday have left the market hungry, in the absence of precise figures. The latest statistics published this weekend also revive fears about the Chinese economy.

China unveiled a new package of measures this weekend intended to stimulate the country’s economy, a few days after disappointing the markets, in the absence of major announcements.

On Saturday, Chinese Finance Minister Lan Fo’an indicated that the government was able to increase the debt and deficit in order to revitalize the economy. However, he has not made any announcements on the costing of these measures. Analysts cited by CNBC estimate between 2,000 billion yuan (206 billion dollars) to more than 10,000 billion yuan (1,300 billion euros), the scale of these fiscal stimulus measures.

The Ministry of Finance also explained that local authorities could, for example, have recourse to special obligations for the purchase of land. Beijing also presented measures on Saturday aimed at resolving the debt problems of local authorities, stabilizing real estate and supporting employment.

“Clear lack of details”

However, the absence of details on the extent of these measures leaves investors wanting more. “The lack of numerical details leaves doubts as to Beijing’s desire to launch ‘big Bertha’ or heavy artillery to revive its economy, after announcements in dribs and drabs in recent months and with no apparent effect,” explains John Plassard, investment specialist for Mirabaud.

“The devil, as they say, is always in the details – or, in this case, in the blatant absence of details” on these announcements, laments Stephen Innes, analyst at SPI AM.

These new measures come after the announcement at the end of September of a series of actions aimed at boosting the Chinese economy. Rate reductions from the People’s Bank of China as well as measures to support a real estate market that has been depressed for three years now have been implemented. Remember that China is targeting growth of at least 5% this year.

However, the markets are increasingly doubtful that such an objective will be achieved. “I have a feeling that fiscal policy measures will take a little too long to come together for us to get to 5% this year, unless the final size of fiscal stimulus is much more larger than expected,” Lynn Song, chief economist for Greater China at ING Bank NV, was quoted as saying by Fortune.

Luxury at a loss

And on the stock market, it is luxury stocks – very exposed to Chinese demand – which are suffering from this vagueness around the latest Chinese announcements. Kering lost 4%, showing the biggest drop in the CAC 40, LVMH returned 3% when Hermès limited its decline to 1.1% around 10:40 a.m.

The CAC 40 also suffers from the decline in luxury, the Parisian index loses 0.3% to 7,555.69 points, when the Dax in Frankfurt increases by 0.3% or the FTSE 100 in London gains 0.1%.

It must be said that China constitutes 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.

Luxury stocks are also weighed down by the latest statistics published this weekend in China, which further fuel concerns about the health of the Chinese economy. In September, consumer prices stagnated on a monthly basis, and only increased by 0.4% in September year-on-year. This represents a slowdown compared to the 0.6% increase recorded in August, still at an annual rate.

Also, producer prices fell more than expected, by 2.8% in September, against 2.5% expected by the consensus and after a decline of 1.8% in August and Producer prices in China are down for almost two years, reflecting weak demand.

Investors will once again have the opportunity to gauge the demand situation in the country, with a new battery of economic indicators on the agenda this weekend. On Friday, China will publish retail sales for the month of September, but also its GDP for the third quarter.