Luxury-Goods Frenzy Propels France’s CAC 40 Near a Record High

The boom in luxury stocks has propelled France’s CAC 40 benchmark near a record close for the first time in more than a year.

(Bloomberg) — The boom in luxury stocks has propelled France’s CAC 40 benchmark near a record close for the first time in more than a year.

Optimism over prospects of an economic reopening in China has put the likes of LVMH, Kering SA and Hermes International at the forefront of the broader equity market rally since the start of the fourth quarter. Some investors are betting that the luxury heavyweights will succeed US Big Tech as the new growth stocks.

“These are companies with very resilient business models, they have shown their capacity to raise their prices if costs increase and they have a great exposure to China, Chinese consumers and their savings,” said Kevin Thozet, a member of the investment committee at Carmignac Gestion in Paris.

LVMH, Kering and Hermes have accounted for close to a third of this year’s 14% gain in the CAC 40, a performance that ranks among the best in Europe.

LVMH hit a series of record highs in the past week, and like Gucci owner Kering and Birkin bag maker Hermes has gained more than 20% year-to-date. L’Oreal SA, whose cosmetics are also popular in China, has added further to the benchmark’s rally.

The CAC was up 0.9% at 7,366.16 by the close in Paris, having trimmed earlier gains that would’ve allowed it to secure a close above the previous record of 7,376.37 on Jan. 5, 2022. Earnings and revenue beats from Orange SA and Pernod Ricard SA helped fuel Thursday’s gains.

European markets have benefited more broadly this year from cooling inflation, resilient economic activity and mild weather that averted a much-feared energy crisis. The CAC 40 is currently outperforming the Stoxx Europe 600 Index, which has risen about 10%. Besides the luxury companies, the biggest contributors to this year’s gains are Schneider Electric SE, BNP Paribas SA and STMicroelectronics NV.

“The CAC 40’s universe is particularly well fitted for the current market”, said Carmignac Gestion’s Thozet. Beyond luxury stocks, France’s banking sector is becoming increasingly attractive given its low multiples and rising interest rates, he said, pointing to the performance of BNP Paribas, which has risen 23% year-to-date.

The French capital remains ahead of London in the contest for the position of Europe’s biggest equity market by value. Britain’s benchmark FTSE 100 Index closed at a record on Feb. 3 for the first time since 2018.

(Updates with the closing prices)

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