Berenberg sees no end to luxury bear market as China woes persist

By Reuters News

** Berenberg sees a poor Q4 setup for luxury names after the sector outperformed the wider European market recently during a tech selloff

** "Absent a clear reversal of the Chinese, aspirational or Gen Z headwinds, we see no end to the bear market. Downgrade risks persist and valuations may overshoot" — Berenberg

** Sees Chinese demand as a structural, not cyclical, problem

** Says a weak Q3 is persisting into Q4, citing a poor Chinese Golden Week, US midterms disruption and Q4 equity selloffs

** Also flags risks to European tourism from global coverage of riots in France and elsewhere, adding to structural headwinds

** Says luxury is a geared AI play, not a defensive trade, as much of the sector's remaining growth comes from markets buoyed by AI-driven wealth

** Sees some opportunities in absolute and affordable luxury, avoids the aspirational middle

** Says restoring the sector's investment appeal will require higher shareholder returns and lower capital spending

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