European luxury stocks find gold to end the year on China, US optimism

Shares of European luxury goods companies are rebounding after a bad year, as investors hope stimulus measures in China will support the economy and spur consumption.

Optimism seems to be returning following Beijing’s recent efforts to support the economy, which has put shares of luxury companies on course for their best month since February. A Goldman Sachs basket tracking the sector is up more than 8 per cent in December, trimming its year-to-date decline to just 1 per cent.

Chinese consumers account for nearly 15 per cent of the global luxury market and any future stimulus measures could spark a rally in equities. Another potential boon for luxury demand next year could come from the US, where Donald Trump’s plans to deregulate the economy and reduce taxes could help to increase consumer spending.

“For many luxury companies, China and the US remain key catalysts for the short-term,” said Dora Buckulčíková, a portfolio manager at Robeco Switzerland. “We are positive on both” even if the exact timing of the turnaround is “still uncertain,” she said in an interview.

This year has been difficult for LVMH Moët Hennessy Louis Vuitton (LVMH), the world’s biggest luxury stock, which was Europe’s largest listed company before being overtaken by drug maker Novo Nordisk.

LVMH shares are down 14 per cent so far this year, their worst performance since the global financial crisis. The stock now trades at 22 times its 12-month blended forward price-to-earnings, below an average of about 25 times since 2018.