Chinese Border Relaxations Boost European Luxury Stock Prices

European luxury retailers saw their shares rise on Tuesday, as investors hoped for a renewed boost in Chinese tourist spending. This comes after Beijing announced plans to ease pandemic-related border restrictions.

LVMH Moët Hennessy Louis Vuitton SE, the luxury goods giant, saw its shares fall 1.01% today.

Advanced as much as 2.5% in Paris while Kering SA, KER 2.19%.

The owner of the Gucci and Saint Laurent brands rose as much as 2.2% today, while Birkin-bag maker Hermès International RMS rose 2.22%.

SCA's stock rose by more than 2% today. In Milan, Moncler's shares rose by 3.01%.

SpA is an Italian luxury fashion house that designs and manufactures high-end shoes and other leather goods. The company is best known for its iconic driving shoes, which are a favorite of celebrities and fashionistas around the world.

SpA and Salvatore Ferragamo are two Italian luxury fashion brands. SpA is a holding company that owns a number of fashion and lifestyle brands, while Salvatore Ferragamo is a high-end fashion brand specializing in shoes, leather goods, and ready-to-wear clothing. Both brands are based in Florence, Italy. SpA also increased.

On Monday, Chinese health authorities said they plan to lift Covid-19 quarantine requirements on international arrivals early next month. This is the latest in a series of policy softenings in recent weeks. China’s National Health Commission also said that it plans to stop treating Covid-19 as a “Class A” infectious disease, which calls for stringent control measures. Instead, they will downgrade the management of the virus to “Class B,” which requires more basic treatment and prevention.

The news of relaxed Chinese border restrictions is a welcome development for luxury brands that had come to rely on spending by Chinese tourists visiting Europe. The inflation-resistant boom in luxury spending by wealthy western consumers has only recently started to show signs of easing, and the relaxed border restrictions will provide a much-needed boost to the sector.

Over the past two decades, Chinese consumers have become increasingly important for the global economy and luxury sector. They typically make most of their luxury purchases overseas, where prices are lower than at home.

When the pandemic hit, the Chinese government imposed some of the world’s most restrictive coronavirus lockdown measures, effectively stopping most Chinese tourists from visiting Europe. In European capitals, a number of luxury boutiques and malls built with Chinese consumers in mind have since been underused or closed, even after Western economies reopened.

This year, concerns about Chinese spending have caused luxury share prices to rise and fall on news about restrictions in the country. In a report last month, consulting firm Bain & Co. estimated that Chinese consumers would account for between 17% and 19% of global luxury spending this year. However, in 2018, they accounted for one third of global spending on luxury goods, the consulting firm said.

American consumers have helped to make up for some of the shortfall, thanks in part to the strong dollar and savings accumulated during the pandemic.

Bain & Company released a report detailing the luxury goods industry's increasing reliance on Chinese consumers. According to the report, sales to Chinese citizens could account for up to 40% of the luxury goods market by 2030. The report also forecast that the luxury goods market would grow to more than 550 billion euros by 2030.