Luxury Billionaire’s Wealth Surges Amid China’s Economic Stimulus #

The billionaire owner of a French luxury powerhouse has seen his wealth increase by $17 billion in a single day, following China’s announcement of new measures to boost economic growth. These measures have been described by some as the long-awaited ‘bazookas’ needed to revive confidence in the Chinese economy.

China and Hong Kong stocks are on track for their best weekly performances in 16 years, following the surprise stimulus measures and strong words from the Chinese leadership.

The luxury company chairman started Thursday having lost more wealth this year than any other billionaire, with his fortune having declined by $24 billion due to a slump in the market for high-end goods. However, by the end of the day, his net worth jumped by $17 billion to $201 billion, marking his third-biggest daily increase ever. This surge came after shares in his company rallied by just under 10% in Paris on hopes that the Chinese leadership would succeed in their efforts to resuscitate the economy, potentially reviving demand for luxury goods.

The luxury company had reported a 10% drop in sales in its Asia region during the first six months of this year compared to 2023. This market, which accounted for 31% of total revenue last year, is dominated by China.

China’s faltering economy had been hurting many Western brands. The country is grappling with several challenges, including sluggish consumer spending, a persistent property slump, and a mounting debt crisis at local governments.

For months, economists had been urging Chinese officials to do more to boost the prospects of the world’s second-largest economy, which was at risk of missing its own 5% target growth rate. This week, officials appear to be heeding those calls.

China and Hong Kong stocks are on track to achieve their best week since 2008. Hong Kong’s benchmark index has added just over 12% so far this week, while mainland China’s blue-chip index has gained more than 15%.

Markets Rally #

Investors responded positively to news that China’s top decision-making body had dedicated its recent monthly meeting to economic issues, deviating from previous procedures. Officials vowed to boost counter-cyclical fiscal and monetary policies, help low- and middle-income citizens, and improve the ailing property market.

The announcement came shortly after the governor of China’s central bank unveiled a package of measures to support businesses. These included cutting one of its main interest rates and reducing the amount of cash that banks need to hold in reserve, which would free up money for lending.

The seven-day reverse repo rate was cut from 1.7% to 1.5%. The central bank also cut the reserve requirement ratio for banks by half a percentage point, potentially freeing up about 1 trillion yuan ($142 billion) for new lending.

Additionally, cuts to existing mortgages were announced, and the minimum mortgage down payment for second-time homebuyers was lowered from 25% to 15% to support the struggling property sector.

However, experts urge caution, as officials must still develop ways to stabilize the property market, which once accounted for up to 30% of economic activity. The sector began to cool in 2019 and fell into a deep trough about two years later, following a government-led clampdown on developers’ borrowing.