LONDON/PARIS - Europe's luxury brands may have sparkled at Paris Fashion Week, but investors are questioning their taste for the shares in the face of a Chinese slowdown and interest rate uncertainty.
"The sector has de-rated sharply in the last 2-3 months, due to a combination of rising interest rates, investor positioning and in anticipation of earnings cuts," said Bernard Ahkong, co-CIO at UBS O'Connor Global Multi-Strategy Alpha. "The recent decline in European luxury stocks reflects the uncertainty over the European economy and also the uneven growth outlook for the Chinese economy," Garnry said.
The end of the French luxury group's 2-1/2 year-long reign was widely put down to investors losing appetite for luxury stocks as well as the growth of Novo's anti-obesity drug Wegovy. Credit card data from the United States showed luxury fashion spending was down 16% year-on-year in July and August. Gilles Guibout, head of European equity strategies at AXA Investment Mangers, was cautious earlier in the year due to sky-high valuations, but is now showing interest.