As China’s luxury market slowdown continues in 2014, analysts have been zeroing in on sales growth rates of top luxury companies as a gauge of the state of the industry. In a new graphic, Bloomberg looks at three additional areas of spending by China wealthy: their gambling in Macau, their purchases of top-shelf wine, and their shopping in Hong Kong. A look at the chart shows that all have shown a decline in recent months, indicating that slowing growth is extending to many areas of the luxury sector.
According to Bloomberg:
Hong Kong’s retail sales tumbled 9.8 percent in April, the biggest year-on-year drop since 2009. Sales rose an average 16 percent a month in the four years through 2013, spurred by mainland purchases. Macau gambling revenue grew 9.3 percent in May, down from the four-year monthly average of about 34 percent. The Liv-ex 100, which reflects price movements of 100 of the most-sought-after wines, has plunged 32 percent from its 2011 high as China cracked down on official gift giving.
China’s anti-corruption campaign and slowing GDP growth have been cited as the main reasons causing declining luxury sales growth, but several other factors are at play when it comes to these three indicators.
In Macau, authorities have cracked down on illegal money transfers and are indicating that it may tighten visa rules. Meanwhile, Hong Kong has recently seen an outbreak of anti-mainland sentiment that may have deterred visitors, and is considering limiting the number of mainland visitors that can enter. While fine wine sales have likely been impacted by the Chinese government’s anti-gifting rules, fears of fake wine have also permeated the market.
These additional factors could explain the top chart's contrast with the S&P Global Luxury Index of stocks for 78 luxury companies, which has more than doubled in the past four years and is "within 2 percent of a record," says Bloomberg.