Luxury falls, fears over Chinese wealth redistribution plan – FashionNetwork.com

PARIS (Reuters) – Luxury stocks fell sharply in Europe on Thursday after reports that China was considering a plan to redistribute wealth with the prospect of a possible increase in taxes on the richest.

Around 09:30 GMT, the world leader in the luxury industry LVMH lost 6.02%, the lowest for three months.

Kering, owner of the Gucci brand in particular, fell 7.94%, the biggest drop in the CAC 40 and for the moment its worst daily performance since March 12, 2020.

With the decline of these two heavyweights, the Parisian CAC 40 index drops 2.87%.

Hermès, Burberry, Swatch and Richemont lose between 3.79% and 6.42%.

Analyst Luca Solca at Bernstein attributes this sharp pullback to possible political developments in China and the prospect of higher taxes on the richest.

Chinese President Xi Jinping would like to limit “unreasonable incomes”, increase wages and develop the middle class, according to the minutes of a meeting of the Central Committee for Financial and Economic Affairs of the Communist Party held on Tuesday.

Meeting participants pledged to “strengthen the regulation and adjustment of high incomes, protect legal incomes, reasonably adjust excess incomes, and encourage high-income groups and businesses to give more back to society. “Bloomberg reported citing China’s New China News Agency.

JP Morgan points out in a note that European luxury stocks, for whom “the Chinese consumer is essential with a third of the sector’s global sales”, were already struggling on Wednesday due to articles reporting the possible establishment property and inheritance tax in China.

“We recognize that this represents an additional risk to the strong recovery seen in the sector so far and we will monitor (…) the increased awareness of consumers towards the demonstration of wealth (although the latter point is has been transient in the past due to the tenacious appetite of Chinese consumers for luxury goods) “, adds the American investment bank.