Luxury stocks 2024: go high-end
As forecasts of a luxury consolidation grow ever louder, Xiaolin Chen, head of international at KraneShares, tells IGTV financial analyst @AngelineOng why higher-end names like Hermes, Gucci and Dior will still do well.
(Video Transcript Summary)
Chinese overseas spending set to rise
Dr Xiaolin Chen from KraneShares speaks to IG financial analyst Angeline Ong about the current trends in China's consumption and luxury stocks.
Dr Chen says that while many Chinese people are choosing to travel within China during the Golden Week holiday, overseas spending is expected to decrease.
This could be because of personal preferences and travel restrictions. However, Dr Chen believes that Chinese people will continue to travel abroad for holidays in the future.
When it comes to luxury stocks, Dr Chen explains that Chinese households have become wealthier, leading to more spending on luxury brands. Chinese consumers now prefer more expensive and exclusive luxury brands, and they are also buying from local Chinese brands.
The price difference between luxury brands sold domestically and abroad has decreased, making shopping locally more appealing.
K-Lux fund targets luxury brands
Dr Chen says popular luxury brands like Hermes, Gucci, Dior and Chanel are loved by Chinese consumers. However, she noted that these brands may have had a temporary increase in revenue after reopening and might need to make some adjustments now.
She also mentions that the growing middle class in China, comprising some 700 million people, is a significant consumer base for both high-end and more affordable luxury brands. To target this market, KraneShares has launched a fund called K-Lux.
Using cleaner energy alongside fossil fuels
In terms of the energy sector, Dr Chen talks about the global shift toward decarbonisation and the role of oil and fossil fuel companies. She acknowledged the challenges of balancing the transition to cleaner energy sources with the continued use of fossil fuels.
Dr Chen highlights China's commitment to reducing carbon emissions and mentions that the country is investing heavily in green energy technologies.
Dr Chen also discusses the inflow of investments into Chinese equities. Since Chinese A-shares were included in global indices in 2018, there has been a positive net inflow of investments each year.
Despite some mixed economic data and outflows in 2023, institutional investors have shown confidence in the Chinese market by strategically positioning themselves for long-term allocations.
Dr Chen believes that with supportive policies and positive data releases, investor sentiment toward Chinese equities will improve in the coming months.
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