Luxury Stocks Sink as China's Comments on Wealth Cause Jitters
Comment of the Day

August 18 2021

Commentary by Eoin Treacy

Luxury Stocks Sink as China's Comments on Wealth Cause Jitters

This note from Bloomberg may be of interest to subscribers. Here is a section:

Luxury stocks sink in Europe, dragging the Stoxx 600 Index lower, after Chinese state media said President Xi Jinping offered an outline for “common prosperity” that includes income regulation and redistribution, putting China’s wealthiest citizens on notice. 

LVMH -4.3%, Burberry -4%, Kering -3.5%, Hermes -3%, Richemont -2.2%

“This is a rather nervous market reaction to leadership statements in China about the ‘third wealth redistribution,’” Bernstein analyst Luca Solca says in an email

“I am not sure there is necessarily a lot to fear from that,” he adds. “Time will tell”

NOTE: Since Xi took office in 2012, the ruling party has made it a priority to end poverty and build a moderately prosperous society, goals that the party sees as central to promoting well-being and strengthening its governance

Income inequality in the country is wide -- the richest 20% earn more than 10 times poorest 20% -- and hasn’t budged since 2015

Eoin Treacy's view

Bernard Arnault is now the wealthiest individual in the world. That’s a significant achievement considering the products his companies sell haven’t exactly changed the world. Instead, the world has changed so there are enough nouveau riche to purchase the products amid the illusion of supply inelasticity.

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