Luxury Stocks Rally, Heightened Spending Goes Global
$RACE, $PPRUY, $MAR, $HLT, $AXP
- The rise of Chinese middle class is helping drive luxury ownership trend.
Investors have driven up the price of luxury-brand stocks around the world, expecting opulent consumption to increase amid the global economic recovery, high stock prices and the growing ranks of the middle class in China.
The S&P Global Luxury Index (SPGLGUN), which consists of 80 companies that provide upmarket goods and services, has been hovering around 3,200 month, the highest mark since its launch in Y 2011.
Wednesday, the Luxury Index finished at 3,241.49, +6.95, or +0.21%, at close: 4:20p EST
It has risen 37% this year, far surpassing the 20% range for major stock indexes in Japan and the US.
“Thanks to the stock market boom, luxury cars are selling extremely well,” said an official at IDOM, whose used-car dealership chains include Liberala, which specializes in imported cars.
A recent exhibition of a Porsche vehicle at a Tokyo shopping mall attracted large crowds. Some of the onlookers showed more than a passing interest in the German luxury automaker’s offering, sitting in the seats to check the feel and opening the trunk.
Worldwide, the likes of iconic Italian luxury Supercar maker Ferrari (NYSE:RACE) and Kering (OTCMKT:PPRUY), the French company that holds Gucci and other luxury fashion brands, have seen their stock prices climb more than 80% since the start of the year.
Ferrari reported a 5% year-on-year increase in global shipments to roughly 6,300 units for the January-September period. Gucci enjoyed a 45% sales jump in the nine-month period.
In Japan, shares of Seiko Holdings, which sells Grand Seiko brand luxury watches, hit a YTD high Monday. As the Nikkei Stock Average has roared back to the mark last seen 26 years ago, the wealth effect has lifted sales of big-ticket items, such as art objects and jewelry, at department stores.
The high-end travel and leisure sector has also been doing well.
US hotel chains Marriott International (NYSE:MAR), and Hilton Worldwide Holdings (NYSE:HLT) have announced plans to increase the number of luxury hotels around the world, including in Japan.
American Express’s (NYSE:AXP)net profit for the July-September quarter rose 19% on the year.
The global luxury goods market has expanded to a record $1.42-T, according to US management consultancy Bain & Co.
China, which already accounts for 30% of the worldwide purchases of such goods, maintains particularly noticeable growth. Bain sees the global market continuing to grow at 4% to 5% annually over the next three years.
“Upmarket consumption will continue to increase, driven by the Chinese middle class, which number more than 100-M people,” Shayne Heffernan, PhD of Heffernan Capital Management (Thailand) said Wednesday. “This should keep related stocks at strong marks.”
It is not just the wealthy who are splurging on high-priced items, as the rise of Chinese middle class is helping drive luxury ownership trend.