Luxury goods are the new consumer “staples” for Chinese consumers, according to Raphael Pitoun, portfolio manager at CQS New City Equity
Speaking to CNBC’s “Squawk Box Europe” after confirmation that Louis Vuitton owner LVMH had agreed a $16.2 billion deal to buy Tiffany & Co, Pitoun said LVMH’s experience growing the Bulgari brand internationally would make it a good match for the American company.
In particular, he highlighted the growing opportunities in China for dominant companies in the luxury market.
“On the luxury goods side, when consumption slowed down a bit in China, there was kind of a catch-up effect after that which is very strong. It looks like luxury goods are a bit like the staples of China,” he said.
“There is a very strong appetite for international brands in China, and when the cycle is a bit difficult and people don’t spend that much on luxury goods, when the cycle improves afterwards, they tend to rush into stores or online and buy more and more.
LVMH shares added 1.8% following confirmation of the deal on Monday morning and are up 56% on the year-to-date.
Tiffany & Co’s German-listed shares jumped 6.7% following the announcement, up more than 75% since the turn of the year.
Pitoun’s CQS New City Global Equity fund is not overweight in luxury and does not hold stock in either company, but he hinted that this “might change.”
“You’ve got, from time to time, opportunities, partially linked to the geopolitical cycle, and you know those stocks are really exposed to travelling and some specific countries, so you might find some opportunities to buy these stocks,” he said.
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