Sharjah24 – Reuters: China's stuttering economic recovery and plans to redistribute wealth threaten to derail Europe's booming luxury sector, leaving many investors apprehensive about buying the stocks even after their sharp August sell-off.
Demand for high-end products in the world's most populous nation is the main driver for the sector, accounting for a third of European luxury goods makers' sales in 2019 and 28% in 2020, according to UBS analysts.
Several analysts used the slide to recommend investors bet that luxury stocks' heady resurgence from COVID-19, which saw the European sector rise 140% from March 2020 to its Aug. 12 peak, would resume.
However, Chinese economic data and supply chain problems caused, in part, by new local coronavirus outbreaks braked the sector's rebound from August lows, triggering a second sell-off.
In just one month the luxury sector's valuation premium has fallen 30 percentage points to 74% from its August peak compared with the broader MSCI Europe index, according to UBS.
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