A sales rebound in mainland China, improvements in Hong Kong, a British surge thanks to a weaker pound and relative U.S. resilience despite the stronger dollar have all lifted luxury stocks including LVMH, Kering, Hermès, Richemont , Burberry and Hugo Boss in the past month.
Chinese customers, the biggest buyers of luxury goods who make up more than a third of global demand, have been re-opening their wallets, luxury groups said, spurred in part by government policies encouraging local consumption.
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“The driving trend is that the Chinese customer is slowly coming back,” Makiko Zuercher, who manages the 22-million euro Dynapartners Luxury Brands Fund, said.
These positives now outweigh concerns about lower tourist traffic in Europe, due to the attacks on Paris, and the drop in purchasing power among Russian, Middle East and Brazilian consumers after the depreciation of their currencies.
“Many of the psychological catalysts which dampened luxury demand – starting with the renminbi deterioration in August 2015 and including attacks in Paris in November 2015 – have now been shrugged off,” HSBC said in a note.
“Every market, with the possible exception of Japan, is doing better or in line with previous trends.”
The one luxury stock for which there is still shorting interest is Cartier owner Richemont, which makes half of its sales from watches, the luxury sector’s most depressed segment.
Data from Astec Analytics shows Richemont has the highest “short” interest. Kering is easily the best performer this year, and short-sellers have very low positions in the stock.
(Source: Business Insider)