According to Raphael Pitoun, portfolio manager at CQS New City Equity The new consumer “staples” for Chinese consumers are luxury goods.

The experience that LVMH has gained from establishing the Bulgari brand internationally will help the company in leveraging the American luxury company Tiffany & Co, Pitoun said after the news that the American company would be taken over by the French owner of the brand Louis Vuitton for and agreed amount of $16.2 billion.

The growth in demand and opportunities for the dominant companies in the luxury market in the Chinese market was highlighted in particular by Pitoun. “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.”

After the two companies announced the merger, shares of LVMH shares rose by 1.8 per cent on Monday and a total of 56 per cent for the entire year so far. On the other hand there was a 6.7 per cent rise in the shares of Tiffany & Co’s German-listed stocks with an overall growth of 75 per cent in price for the year so far.

There is no overweight of luxury sticks in Pitoun’s CQS New City Global Equity fund and no stocks the two companies in question is held by the fund.

“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.

(Adapted from CNBC.com)

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