European Luxury Stocks Decline Amid Lack of New Chinese Stimulus
Shares in European luxury groups fell in mid-morning trading on Tuesday, as analysts were disappointed by the absence of new fiscal stimulus measures announced by Chinese officials.
During a press conference, the chair of China’s National Development and Reform Commission (NDRC) expressed full confidence that the world’s second-largest economy would achieve its growth target of roughly 5% this year. However, the NDRC did not unveil any new fiscal stimulus plans to accompany the support policies introduced last month, leading investors to feel underwhelmed.
This cautious sentiment impacted stocks in China, which saw limited gains after the market reopened following the Golden Week holiday. Luxury brands including LVMH, Kering, Burberry, and Hermès experienced declines, as they heavily rely on the Chinese market, estimated to account for 35%-40% of global luxury consumption according to Bain analysts.
Additionally, European stocks in other China-exposed sectors such as mining and automobiles faced declines. In September, Chinese officials had announced a comprehensive package of new policies, including significant cuts to interest rates and reductions in current mortgage rates.
The People’s Bank of China also rolled out a 500 billion yuan swap program aimed at allowing funds, insurers, and brokers more accessible funding to purchase stocks. They further declared a provision of up to 300 billion yuan in affordable loans to banks to finance share purchases and support buybacks by public companies.
Following the announcement, Chinese stocks experienced a surge, culminating in the largest single-day increase in 16 years on the last trading day before the Oct. 1-7 holidays.
(Reuters contributed reporting.)
Comments (0)