Luxury investors breathed a sigh of relief this morning after the People’s Bank of China announced an array of economy-boosting policies, including £84bn of liquidity support for equities. High-end European stocks were a sea of green, with French luxury fashion house LVMH up 4.2 per cent, Hermes up 4.
3 per cent and Kering up 4.3 per cent. In some rare good news for British luxury brand Burberry as its stock price rose by nearly five per cent in early trades, although it pared back some of its gains later in the day.
Burberry has been one of the worst-performing stocks on the London stock exchange in the last year, and recently slipped out of the FTSE 100 after its share price dropped nearly 75 per cent in 16 months . Burberry has partially blamed its performance on weak demand from China, which has been one of two bad headaches for the luxury sector over the last year – the other has been the cost-of-living crisis in Europe. The luxury rout has wiped almost £150bn of the sector’s value in the second quarter alone, according to Bain.
The sharp rally in stock markets is a good indicator that investors believe the measures will have a genuinely positive impact on Chinese economic growth, which has disappointed expectations this year. The package could “unleash the power of the Chinese consumer” which would provide a longer-term rally for French luxury and consumer goods, which are already “basking in a Beijing glow”, research director at XTB Kathleen Brooks said..