China Luxury Demand Rallies, But What Does It Mean For 2013?

Plaza 66 luxury mall in Shanghai

Following a significant dip in demand for some major luxury brands in China over the past six months, recent figures project a strengthening in the first quarter of 2013, even for beleaguered high-end watchmakers. As Bloomberg notes today,

Concern over slowing Chinese growth was waning, which might help luxury shares, said Joerg Lorenz of Zuercher Kantonalbank. Sales in the second-biggest economy had risen since the summer, and spending abroad was now "more aggressive", Francesco Trapani, the head of LVMH's watch and jewellery unit, said.

Richemont's first-half profit beat analyst estimates, as a weaker euro spurred Asian spending on luxury goods in Europe.

"Markets seem to assume that China growth is bottoming out and there's even more of a rally in store for luxury goods," Lorenz said. "The latest watch export statistics support this view."

Watchmakers hope for a rebound in mainland Chinese demand next year

Despite rising sentiment, the world's largest luxury groups aren't out of the woods quite yet. While Richemont celebrates a 13 percent increase in luxury watch exports month-on-month, LVMH raised prices at its top fashion and leathergoods brands in Europe following reports that indicated its lowest sales increases since 2009. With raw material costs continuing to rise, the luxury giant is set to increase jewelry prices next year. However, we don't expect the increases to dissuade Europe-bound Chinese tourist-shoppers, as prices will remain significantly lower in Paris than Beijing.

In 2013, the question for China remains what kind of growth leading luxury groups like LVMH and Richemont can realistically expect. According to the average estimates in a recent Bloomberg survey, China's economy should expand around 8.1 percent in 2013, up from 7.7 percent this year but down from 9.3 percent in the luxury boom year of 2011. Though more conspicuous brands like Rolex and Louis Vuitton should perform better than expected in 2013, owing to continued third- and fourth-tier expansion, we expect the most significant growth stories in top-tier cities like Beijing and Shanghai t0 be among boutique luxury brands, independent high-end designers (via e-commerce and brick-and-mortar), and even a handful of domestic jewelers.

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www.balconytvmelbourne.com 'Like' us at www.facebook.com/balconytvmelbourne PRESENTED BY CASSIE WALKER BROUGHT TO YOU BY PRINCE BANDROOM - www.princebandroom.com.au MISCREANT RECORDINGS - www.miscreantrecordings.com Joelistics grew up in Sydney, the offspring of a Chinese Australian father and an Anglo Australian mother, playing drums in punk and funk groups, but drawn to hip hop with its outspoken politics and ad hoc sonic cannibalism. At the beginning of the new millennium, Joelistics took the first of a series of 'voyages' around Australia, working as a fruit picker, visiting hippie festivals and hitch hiking across the country, eventually settling in Melbourne where he discovered a city going through a creative boom. In 2002 he founded TZU alongside Count Bounce, Yeroc and Pasobionic, signing to Liberation records the same year. Earning their stripes on the live circuit, TZU built a solid reputation on the back of their up-beat party rhymes, joining acts like The Herd, Hilltop Hoods and Bliss n Eso, as a vanguard of the second generation of Australian hiphop forging an identity both artistically and commercially. After three ambitious records, multiple award (AMP, J Award) nominations, countless festivals and tours, TZU decided to take a breather. Joel embarked upon another voyage, living in Shanghai and Beijing; travelling through Mongolia; and eventually settling in Paris for six months. In between writing for online travel sites and teaching English, he began work ...

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