Fears that demand for luxury goods in China is slowing as growth in the country weakens are mere exaggeration and paranoia, according to a leading luxury goods fund manager.
Scilla Huang-Sun, fund manager of the JB Luxury Brands Fund at Swiss & Global Asset Management, says that with more millionaires now living in Asia compared to Europe, the region offers robust growth prospects. She adds there are numerous luxury brands that offer good investment potential.
"Most Europeans and people in the U.S. are a bit paranoid about China, but if you go to Asia, actually people are still quite constructive. That doesn't mean China doesn't have any problems, but we still think it will not collapse; China will still be able to grow between 6 and 8 percent...and that will of course drive consumption and demand."
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Huang-Sun's optimism comes after a difficult end to 2012 for many luxury goods companies.Since the second quarter of 2012, luxury revenue growth has started to fall to 2009 levels.
Investment research firm ISI blamed such a drop on the state of the Chinese stock market and real-estate prices falling, both of which are key wealth engines in the Far East. ISI even suggested that Chinese millionaires are spending on luxury goods at unsustainable levels, perhaps leading to a period of enforced austerity on this band of high-end consumers.
Since last year, the government has also moved to curb the gift-giving culture in China which accounts for a lot of luxury spending. However, this does not worry Huang-Sun, who emphasizes the exaggeration of such issues by Westerners.
"In terms of how much of the luxury turnover is due to corruption I would say it has been exaggerated in the press," she explained. "What is also true is that this gift giving culture is very much ingrained in the Asian mentality. It is not always illegal."