LVMH gains $22 million on stock after China lifted group travel bans

14-08-23

• LVMH led luxury stocks in Europe as China lifted a ban on group travel, prompting travelers to spend on high-end watches and fashion. 

• After the Paris market closed, LVMH shares marked a 3.43% increase. 

Likewise, luxury brand Hermes gained 3.20%, while L'Oreal rose 3.02%, adding some 20 billion euros ($22 billion) in market value between the three brands. Luxury watch retailer Rolex rose 3.11% after maintaining earnings guidance in a trading update.

The luxury brands' earnings gains come as China ended a ban on group travel in countries including the U.S., U.K., Australia, South Korea and Japan. 

Shoppers from China account for about 25% of European luxury sales, including purchases by tourists, according to data from Goldman Sach. 

Group tours by Chinese tourists had already been approved in nations such as Switzerland, Italy, Spain, France, Greece, Denmark, Iceland and Portugal earlier this year. 

After a solid start to the year, luxury stocks have declined in recent months in response to weak consumer economic data in China. 

Investors are betting on the hope that Beijing will soon implement more decisive stimulus measures to revive a flagging economy. 

Domestic travel in China has surpassed the 2019 level, while international flights lag behind. Even months after the lifting of restrictions due to the COVID-19 virus, tourism in China has remained down. 

In the first half of the year, tourists made about 40.4 billion overseas trips, mainly to Asia, which is 26% of pre-pandemic levels, according to data from the China Tourism Academy. 

Domestic flight capacity reached 17% above the pre-pandemic level in July, but international capacity remains about half of 2019 levels, show information from aviation analytics firm Cirium.

Still, Chinese tourists continue to have a preference for shopping in nearby countries such as Japan, where in 2019 Chinese tourists accounted for about one-third of Japan's international visitors and spent more than $12 billion in the country, according to data from the Japan National Tourism Organization.