www.research.hsbc.comDisclosures&Disclaimer:ThisreportmustbereadwiththedisclosuresandtheanalystcertificationsintheDisclosureappendix,andwiththeDisclaimer,whichformspartofit.PlayvideowithErwanRambourgEquitiesGlobalLuxuryGoodsApril2019By:ErwanRambourg,AntoineBelgeandAnne-LaureBismuthPandaLuxuryStaycationWhyChinashouldgrowattwicethegloballuxurymarketpaceRecentRMBappreciationissupportivetosaleswithtravelingChinese,mostlyinAsiaButshiftsinpricing,e-commerce,andtravelretailmeanrepatriationofgrowthinmainlandChinaseemsstructural,growingat12%vs6%globallyperourestimatesin2019WeseeKering,Swatch,Richemont,andSMCP(allBuys)andBurberry(Hold)well-placedtobenefitfromthatrepatriationofgrowthSPOTLIGHT1Equities●GlobalLuxuryGoodsApril2019Thepanda’s2019travellogWehavelittledoubtthatin2019Chineseconsumptionwillonceagainhelpsupportglobalgrowthintheluxurysector.Whiletheremaybesomeshort-termgrowthabroad,webelievethatinthelongrun,luxuryconsumptioninChinaitselfwillgrowmore.TwokeythemesweseeplayingoutwithChinesetravel:Thisyear,wethinkthatluxuryconsumptionoutsideofChinawillbenefit,particularlyastheRMBhasstrengthenedrelativetokeycurrenciesincountrieswhereluxuryconsumptionhappens.Ourtravelingpandastendtofollowthemoney,particularlytheweakercurrencies,sothisbodeswellforluxuryconsumptionoutsideofChina.Othersupportivefactorsincludetheeasingofvisasinmanydestinations,whichmakesiteasierforChinesetouriststotravel,butwethinkthattheactionwillhappenmoreinAsiathaninEurope(security)andtheUS(cost).Longterm,luxuryconsumptionwillhappenincrementallyathome.KeystructuralfactorsthatdiscouragedluxuryconsumptioninChinainthepastareresolving,andtheprogressmadeisalreadybearingfruit.AswenotedinourrecentreportTooBlingtoFail(26Feb2019),afewyearsago,75%ofChineseluxurysaleshappenedoutsideofChina.Weseethatmovingto50-50eitherthisyearornext.Thestructuralfactorssupportingtheincreaseindomesticconsumptionincludetheharmonizationofprices,whichmakesshoppingabroadlessappealingasthepricesnormalize;thecontinueddevelopmentofe-comme...
