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Luxury stocks rise on China's re-opening

By Don-Alvin Adegeest

Dec 27, 2022


Image: Shanghai by Hyunwon Jang via Unsplash

China’s announcement on Monday that it would re-open its borders to visitors and drop quarantine requirements was good news for luxury stocks.

Luxury brands rely heavily on Chinese shoppers, and the lifting of the previously mandatory quarantine for incoming passengers will be China’s first full opening since the dawn of the pandemic in 2020. Previously travellers had to quarantine up to 21 days in designated hotels, if they were granted entry all.

In response LVMH, the world’s largest luxury group, saw a 2.7 percent rise, with Richemont shares up 4 percent, reported Reuters. China accounts for 21 percent of the world’s 350 billion euro luxury goods market, behind North America and Europe, Reuters said.

Despite the lifting of restrictions, China has seen a surge in infections in recent weeks, with some reporting estimates of 250 million cases. China, however, has reported record low numbers of Covid-related deaths, which has left many organisations questioning the validity of data released by China’s National Health Committee.

Many companies, from technology to fashion, are looking to diversify production away from China, where output has been negatively affected over the past two years due to Covid restrictions and closed borders. Investors are further worried a possible Chinese invasion of Taiwan could prove to be problematic for exports if sanctions are levied.