Ice Fu plans to pack light when she travels to Paris this month. The 28-year-old restaurant owner from Shenzhen in southeastern China needs to leave room for the Chanel, Hermes, and Louis Vuitton handbags she plans to buy.

"We have Chanel shops in China, but they're always out of stock," says Fu. "The Hermes bags I want to get still aren't available in China."

Even as makers of luxury goods are racing to open new stores in China, they're finding their European flagships mobbed by tourists like Fu. Around 2.5 million mainlanders visited western Europe this year, 500,000 more than in 2009. And that number is expected to climb to 3 million by 2012 as incomes continue to grow, according to U.K. forecaster Oxford Economics.

The Chinese now account for at least a quarter of European luxury goods sales, estimates Luca Solca, an analyst at Sanford C. Bernstein. Their buying power has been bolstered by the yuan's 12 percent rise against the euro this year, Bloomberg Businessweek reports.

"The classic shoppers on Place Vendôme in Paris used to be stars, celebrities, members of royal families from the Middle East in big limousines," says Uché Okonkwo, executive director of Paris-based consultancy Luxe Corp. "Today, it's Chinese tourists that are brought in by big buses in groups."

Mainland Chinese spent $23.4 billion in 2009 on luxury handbags and suitcases, shoes, watches, jewelry, clothes, cosmetics, and perfumes, according to a Nov. 9 report from Bain & Co. More than half of that was purchased overseas. The trend is buoying the luxury goods industry, with sales in Europe on course to grow 6 percent this year, after falling 9 percent in 2009, according to Bain's forecasts.

Eoin Treacy's view This year's World Expo in Shanghai was an opportunity for countries to showcase their products to literally millions of potential Chinese consumers. Most countries seem to have come to the same conclusion in what they think they can sell to China's new middle class: tourism, luxury brands and education. Germany, whose pavilion focused on technology and industry, was an obvious exception. However, the Italian pavilion had a full range of shoes and bags. France concentrated on art and food. Denmark brought the mermaid from Copenhagen and not much else. Ireland attempted to identify with swift development and was selling education. Most of Latin America focused on either commodities or tourism.

As with just about every other group of newly wealthy people, whether in the Americas, Europe or Asia, a keeping up with the Joneses attitude develops. Many seek to display the trappings of their wealth which has led to increased demand for luxury consumer goods in tandem with some of the more affordable variety.

Prices for a number of luxury brands have surged of late. BMW, Richemont, LVMH, Swatch, Christian Dior, Burberry, Polo Ralph Lauren, Tiffany and Coach among others have surged to new highs. They remain in consistent advances but are becoming increasingly overextended relative to their 200-day MAs and the first clear downward dynamics are likely to signal the beginnings of reversionary corrections. For traders fortunate enough to be long, tight money control discipline is likely to pay off, while investors may start to think about taking some money off the table.

As we have said on numerous occasions, when an in-form sector becomes wildly overextended relative to a trend mean such as the 200-day MA, it is time to favour reducing the position rather than dramatically increasing it. The optimal time to increase a position within a well defined medium-term uptrend would be following a reversion towards the mean, once support has been found.

Elsewhere in the luxury goods sector, Hermes as mentioned yesterday, found at least short-term support following a sharp pullback towards the 200-day MA. Essilor International has been ranging for the better part of a year, above the 2007 peak and a sustained move below €46 would be required to question scope for a successful reassertion of the medium-term uptrend. PPR remains in a consistent staircase medium-term uptrend and broke out of the most recent range last week. While prices may encounter some 'karma' in the region of the 2007 peak near €140 a sustained move below €110 would be required to question medium-term upside potential. Remy Cointreau has a relatively similar pattern. Bulgari broke out of a yearlong range six weeks ago and has been consolidating above €7 since. A sustained move below that level would be required to question medium-term upside potential

Given the high degree of commonality in the sector, the latter group of companies have significant catch-up potential.