Date
17 October 2017
Burberry shares fell sharply in London Tuesday on worries over reduced spending power of Chinese consumers amid the renminbi's devaluation. Photo: Reuters
Burberry shares fell sharply in London Tuesday on worries over reduced spending power of Chinese consumers amid the renminbi's devaluation. Photo: Reuters

China worries prompt sell-off of luxury goods makers

Fears of reduced spending by Chinese tourists and consumers amid the renmibi’s depreciation have prompted global investors to dump shares of Western luxury goods makers.

Burberry Group and Hugo Boss saw their shares plunge more than 7 percent in two days after China devalued its currency, Bloomberg News noted.

The sell-off came even though the companies have some of the smallest sales exposure to the yuan among luxury goods makers.

“It’s at these times that you understand the extent to which the market of luxury goods is exposed to China and how much it depends on the decisions of the Chinese government,” Mario Ortelli, an analyst at Sanford C. Bernstein, was quoted as saying.

Burberry gets 11 percent of its revenue in yuan, compared with 7 percent for Hugo Boss.

Swatch Group, which has lost 8.8 percent in two days, has the biggest exposure, with 23 percent, the report said, citing estimates by Credit Suisse.

Rene Weber, an analyst at Bank Vontobel in Zurich, said the biggest concern for luxury companies is the slowdown of the Chinese economy.

“You have a lot of sales in China, and if you see a strong decline in the economy, it becomes an issue for these companies,” Weber said.

“With a deteriorating economy, people cut spending at home and abroad.”

– Contact us at [email protected]

RA/RC

EJI Weekly Newsletter

Please click here to unsubscribe