Following a significant rally in the South Korean stock market (KOSPI), a wealth effect is subtly reshaping the landscape of luxury consumption in Asia. According to a recent research report, South Korea's luxury demand is showing a clear inflection point. Key drivers include department store same-store sales growth accelerating to 15% in the fourth quarter of 2025, a surge in Chinese tourist arrivals, and a price arbitrage window created by the depreciation of the Korean Won against the Chinese Yuan. The convergence of these three factors positions the South Korean market as a potential key marginal growth source for the European luxury sector in the near term.
The report highlights that European luxury companies with significant exposure to the South Korean market, such as Hermès, Moncler, Prada, and Burberry, are poised to be the primary beneficiaries. Currently, the valuation of the European luxury sector has retreated to the lower end of its historical range. Any news confirming a sustained improvement in demand could potentially trigger a sector-wide valuation re-rating.
South Korean consumers hold a unique and strategic position in the global luxury market. Estimates suggest the South Korean market contributes a mid-to-high single-digit percentage of total sales for major luxury groups. More importantly, South Korean consumers are recognized within the industry as highly sophisticated and trend-setting, with their consumption patterns serving as a significant bellwether for the broader Asian region. Particularly in the current post-pandemic context of generally soft luxury demand, South Korea, which avoided stringent lockdowns, has maintained a relatively independent consumption rhythm, making it a crucial leading indicator for observing Asian luxury demand trends.
The report identifies three core factors driving the improvement in South Korean luxury demand: First, the stock market wealth effect. The KOSPI index recorded substantial gains, with local residents' participation rate in the stock market being higher than the Asian average. Rising stock prices directly enhance perceptions of household wealth, thereby stimulating willingness for high-end consumption. Second, a surge in Chinese tourists. South Korea's visa-waiver policy for Chinese tour groups, combined with ongoing geopolitical tensions between China and Japan, has redirected a significant number of Chinese tourists to South Korea. Data from the Korea Duty Free Shops Association shows a notable rebound in inbound tourist numbers. Third, an open currency arbitrage window. The sustained weakness of the Korean Won against the Yuan has significantly enhanced the price attractiveness of luxury goods in South Korea. By January 2026, luxury prices in South Korea had become broadly aligned with European levels, eliminating a premium that existed previously.
On hard data, South Korean department store same-store sales growth demonstrates a clear acceleration trend. Furthermore, during the Q4 2025 earnings season, several luxury brands provided positive commentary on the South Korean market, corroborating the persistence of the demand improvement.
Based on estimates and company disclosures for 2025, the sales exposure of various luxury companies to the South Korean market is approximately as follows: Hermès, Moncler, Prada (~9%); Burberry (~8%); Ferragamo (~7%); Kering, Richemont (~6%); LVMH, Swatch (~5%); Zegna (~4%); Brunello Cucinelli (~3%); Hugo Boss (~2%); Pandora, EssilorLuxottica (~1%).
Consequently, Hermès (Neutral), Moncler (Buy), Prada (Neutral), and Burberry (Buy) are identified as the most likely beneficiaries of the demand recovery in South Korea. From a valuation perspective, the European luxury sector's current premium relative to the MSCI Europe Index is near its 15-year historical average but below its 5-year average. The report concludes that sector valuations are at the lower end of their historical range, and confirmed signals of sustained demand improvement in South Korea could act as a key catalyst for valuation recovery towards the upper end of the range.
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