Initially, Rambourg expects growth overseas over the short-term due to the easing of visas in many countries. That–along with the appreciation of the Chinese currency–would help some Chinese tourists with overseas travel, with preferred destinations within Asia, such as Japan. Furthermore, Vietnam and Malaysia have become significant tourist destinations. Over the long haul, he is predicting that they also will stay closer to home due to security concerns in Europe and cost concerns in the U.S.
“Long term, luxury consumption will happen incrementally at home,” he said, explaining that past barriers are no longer a hindrance. In previous years, luxury consumption outside of China was as high as 75 percent, but Rambourg said consumption is now moving closer to 50 percent. With the harmonization of prices, continued development of e-commerce and travel retail, there’s less of a need to head abroad to buy the goods, he explained.
According to Rambourg, the companies that will benefit are Kering, Swatch, Richemont and SMCP, and HSBC has a “Buy” rating on the stock of all of them. Also on the list to benefit from growing luxury spending at home is Burberry, shares of which have a “Hold” rating from HSBC.
The report cited cosmetics, accessories, footwear, apparel, jewelry and perfume as the top luxury categories in which Chinese consumers are willing to spend more. Further, the report didn’t think that ongoing trade tensions with the U.S. or tariffs should affect the domestic economy since services is the largest sector.