Luxury thanks President Xi for $70 billion loss
Following recent wealth redistribution signals from Chinese president, Xi Jinping, luxury stocks tumbled in late August at the prospect of a significant top-level reigning in of the country’s biggest spenders, long considered the backbone of the global luxury industry.
President Xi’s goal, he said, is to “adjust excessive incomes” and, by extension, support China’s middle class. Specifically, the president added “common prosperity” to his agenda for the 20th National Party Congress, due to be held in October 2022, on August 17.
As a result, luxury leader LVMH’s market capitalisation decreased by more than €30 billion between August 16 and 24, according to Bloomberg data. Fellow French rival company Kering saw its own drop of more than €10 billion.
Though no new measures have been implemented as of yet, Jing Daily cited reporting by both Forbes and The Wall Street Journal which suggested that a sizeable subsequent selloff of LVMH, Kering, Hermès and Richemont stocks, in particular, ultimately led to a total market loss of $70 billion during the week following President Xi’s speech.
HSBC luxury analyst Erwan Rambourg speculated to Vogue Business that the announcement, compounded by rising cases of covid-19 throughout China and the United States, may well temper investors’ short-term enthusiasm for luxury stocks.
Interestingly, Mr Rambourg added that even if President Xi’s efforts to realign China’s wealth disparity were effective, this could serve to boost sales of so-called “affordable luxury” brands, cosmetics and sporting goods, “but not necessarily of a Louis Vuitton or a Gucci”.
