Mutual Fund Companies in China Eyes on Global Luxury Product Industry

How to hedge against inflation has become a hot topic in China. Sluggish performances during the past two months in Chinese stock markets have driven many people to withdraw capital. Meanwhile, mutual funds targeting luxury products have gained great popularity.

Let's take a closer look with our reporter Liu Min.

White collar worker Tang Shan has a stable income and he used to invest in A-share stocks. But the confusing ups-and-downs in the market have forced him to adjust his investment strategy.

"I'm quite negative on the trend of the stock market, so I sold all my shares two months ago. I've also sold my stock-oriented mutual funds."

With more money in hand, Tang Shan is considering other investments.

"When I went to the bank, they recommended financial products. It seems like the profit returns would be high, but they are too complicated and I dare not invest all my money there."

According to statistics, the A-share market in China by the end of May had 1.39 trillion Yuan in total, 40 billion yuan less than April. When the stock market has disappointing performances, investors in China prefer other investments such as speculating on precious stones, antiques, or agricultural products.

Recently, domestic mutual fund companies are launching a new series of stock-oriented funds targeting investments of luxury products. Last year, luxury product consumption volume in China was 12 billion U.S. Dollars. According to forecasts, by 2023, China will develop a luxury product market with trading volume of 38 billion U.S. dollars, taking up 32 percent of the global market. Qu Xiangjun, vice president of Roland Berger Consultative Company says China is developing robustly in this area.

"The largest consumption market is Europe, and the second one is the United States, and the third is China. The global luxury product market increases 10 percent annually, while China grows 23 percent every year."

This May, Chinese Company Fosun Group based in Shanghai spent one billion yuan to buy 9.5 percent of shares from Greek's luxury brand Folli-Folie. Besides listed companies, mutual fund investment companies have noticed the prosperous trend in luxury product stocks. Analyst Li Jun from Fu Guo Mutual Fund Management Company says many mutual funds in China have shifted their focus from low-end investment areas to higher-end ones like the luxury product industry.

"We've got data showing the stock index from the luxury product industry have doubled during the past two years. But overall stocks around the globe only grew by 50 percent. Such record indicates that many investors are optimistic about development of this market."

Securities analysts estimated that the three markets of Taiwan, Hong Kong, and the Chinese mainland will boom for another 10 years for luxury products. For the mainland alone, the market value is projected to increase to 0.6% of China's GDP, to become the world's largest market for luxury products.

For CRI, I'm Liu Min.