Rampant Chinese Revenge Spending
The Hermes boutique in Guangzhou made almost three-million-dollars on its first day reopening after lockdown – a record in China. It seems for every would-be customer fearfully barricaded at home; there are three or four willing to risk it all to go shopping!
This news from the ground supports economists’ idea of pent up demand, ready to explode as containment measures are lifted. The markets could rocket as we purchase stuff again to support who we’re trying to be. We’ve been packed in like sardines for months. It seems a wave of ‘revenge spending’ will hit as we try to rebuy our identities.
It’s all about timing for investors. We operate in forward-thinking markets, and a run-up in fashion retailers like Louis Vuitton Moet Hennessey could reverse if traders decide this topical idea has run its course, and the world is back to normal.
There’s also a geographic dilemma. The United States has high cases and employment figures, but it’s not the same elsewhere in the world. In addition, priority spending will be for local shops that have struggled the most during lockdown. It won’t be for the multi-billion dollar mega brands, making this a difficult trade, potentially.
There’s also the product mix, another variable in the equation. Bain’s research claims that to avert the financial squeeze and get spending flowing, handbags and shoes across all price ranges will need pushing the hardest. It’s up to the investor to peruse markets for the retailer with the best blend of bull signals. Over to you!