We are all familiar with luxury goods and brands as they have long been an essential part of the local consumer market. In fact, luxury brands may cover many categories, such as clothes and shoes, hand bags, jewelry, watches, and even cars, wine, yachts, etc. Those names are so reputable and expensive that they are often linked to the consumers’ social standing. The luxury goods have loyal customers and are always in great demand. This unique phenomenon makes their prices very inelastic and thus provides a good defensive nature against inflation.
Western countries had dominated the global luxury goods industry due to historic and economic reasons. However, the situation is changing drastically. In 2010, China surpassed Japan as the world’s second largest economy showing amazing purchasing power in high-end consumer markets worldwide. Walking into luxury shops in major cities around the world, you may find there are more Putonghua speaking customers than English speaking customers. Hong Kong, benefited from exceptional geographical advantages as well as low taxation, has become a hub of all international luxury brands for Mainlanders. Statistics shows that Mainland tourists have become one of the driving force behind the city’s consumption and economic growth.
Meanwhile, the theme of high-end consumer goods is quietly making some noise in the Hong Kong stock market recently. A few related companies went public in the second quarter while many luxury brands or chain stores have expressed their interests to launch an IPO in the second half of this year. Except for IPOs, some relevant listed companies are likely to benefit from the revaluation of the retail sector of gold, jewelry and watches. Besides, those property investors who own large scale assets in major shopping areas will also benefit.
Source: Mr. Peter Pak
Executive Director
BOCI Research Limited
July 2011
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