Wealthy French entrepreneur accrues a staggering $17 billion due to China's economic revitalization strategy.
Bernard Arnault isn't the sole victor in this scenario. China and Hong Kong stocks are set to record their finest weekly performances in 16 years, as per Reuters, following the unexpected stimulus actions and strong declarations from the Chinese administration.
Arnault, the head of LVMH, began Thursday having shed more wealth this year than any other billionaire, with his fortune plummeting by $24 billion due to a downturn in the high-end goods market, as per the Bloomberg Billionaires Index.
However, his net worth surged by $17 billion to $201 billion by the end of the day, as reported by the index, marking his third-largest daily increase ever. This was after shares in LVMH surged by nearly 10% in Paris, fueled by optimism that the Chinese leadership would succeed in reviving the economy, potentially rekindling demand for luxury goods.
LVMH declared in July that sales had dropped by 10% in the first half of this year in its Asia region compared to 2023. This market, which accounted for 31% of total revenue last year, is largely controlled by China.
China's struggling economy had been impacting numerous Western brands. The nation is grappling with several challenges, including sluggish consumer spending and a persistent property slump, as well as a mounting debt crisis at local governments.
For months, economists had been pressing Chinese officials to take more drastic measures to boost the flagging prospects for the world's second-largest economy, which was at risk of falling short of its own 5% target growth rate. This week, it appears they are responding to those calls.
"Beijing appears to be determined to release its stimulus weapons in quick succession," analysts at investment bank Nomura wrote in a research note on Thursday. "Beijing's acknowledgment of the severe situation of the economy and lack of success in a piecemeal approach should be seen positively by markets."
In fact, as of Friday, China and Hong Kong stocks are on course to record their best week since 2008. Hong Kong's benchmark Hang Seng index has increased by over 12% so far this week, while mainland China's blue-chip CSI300 has gained more than 15%.
Markets surge
Investors rejoiced at the news on Thursday that China's 24-member Politburo, a top decision-making body, had dedicated its September monthly meeting to economic issues, deviating from its usual focus.
Chaired by leader Xi Jinping, officials pledged to boost "counter-cyclical fiscal and monetary policies," to assist low- and middle-income citizens and to enhance the ailing property market, which has been in a four-year contraction.
The announcement came just two days after Pan Gongsheng, governor of the People's Bank of China (PBOC), announced a package of measures to support businesses by reducing one of its main interest rates and decreasing the amount of cash that banks are required to hold in reserve, releasing funds for lending.
The seven-day reverse repo rate was reduced from 1.7% to 1.5%. The PBOC also reduced the reserve requirement ratio for banks by half a percentage point, freeing up about 1 trillion yuan ($142 billion) for new lending.
Pan also disclosed cuts to existing mortgages and lowered the minimum mortgage downpayment from 25% to 15% for second-time homebuyers to support the ailing property sector, which many economists believe is the root cause of China's numerous economic issues.
However, experts urged investors to remain cautious, as officials must still come up with strategies to stabilize the property market, which once accounted for as much as 30% of economic activity. It began to cool down in 2019 and entered a deep trough about two years later, after a government-led crackdown on developers' borrowing.
The stimulus actions and strong declarations from the Chinese administration have led to China and Hong Kong stocks recording their finest weekly performances in 16 years, potentially benefiting various businesses operating in these regions. Bernardo Arnault, the head of LVMH, saw his net worth surge by $17 billion due to the optimism surrounding China's economic revival, which could rekindle demand for luxury goods.
