China Securities Co., Ltd. (CSC) released a research report stating that, accompanied by the wealth effect from the stock market rally, domestic high-end consumption has gradually recovered since Q3 2025, as evidenced by the performance of international luxury brands in the Greater China region and the回暖 of high-end shopping malls. The report is optimistic about investment opportunities in the high-end consumption recovery for 2026. The timing and strength of recovery across different high-end consumption categories are primarily determined by four dimensions: the proportion of VIC customers, the spending sequence/necessity level post-wealth increase, supply elasticity, and consumption trends. Categories with strong initial necessity (not basic living necessities, but class-based or social necessities for high-net-worth individuals based on status/social scenarios) recover first. Categories with a large VIC customer base show high elasticity later on, those with consistently good supply structures are the most sustainable, and those aligning with future consumption trends offer additional beta. The more persistent the wealth effect and the more discretionary the category, the greater its elasticity. The main views of CSC are as follows: High-net-worth individuals are a primary support for high-end consumption, and the wealth effect from the stock market rise significantly contributes to its recovery. According to Bain & Company data, there were approximately 300 million global luxury consumers in 2024, a substantial number, with the core 2%-3% VIP customers contributing over 40% of sales, a proportion that is continuously increasing. Compared to the property market, the wealth effect from stocks has been more pronounced in recent years. The stock market upturn in 2025 drove the total market capitalization of A-shares/Hong Kong stocks to 123 trillion yuan/48 trillion HKD by the end of 2025, a net increase of 24.5 trillion yuan/12.7 trillion HKD from the end of 2024. Three verification points indicate that high-end consumption is currently in a recovery phase. 1) International luxury brands gradually recovered starting Q2 2025 after a weakening trend in 2024; by Q3 2025, the revenue growth rates in the Asia-Pacific region for major groups (except Kering) had turned positive, and the Chinese domestic market was also improving. 2) China's high-end retail properties began recovering around the end of 2024 and early 2025. Taking Swire Properties and Hang Lung Properties as examples, after pressure in 2024, they entered a mild recovery channel from 2025, with occupancy rates gradually recovering and sales improvement trends becoming evident, particularly in top-tier luxury malls. 3) The global luxury market also entered a recovery phase starting in Q3 2025. How to view the recovery rhythm and investment opportunities across high-end consumption categories: Reviewing the global luxury market over the past five years, Bain data indicates that between 2019-2025E, the fastest-growing segments in the global luxury market are luxury cruises, private jets, high-end dining, personal luxury goods (leather goods, jewelry, footwear, apparel, beauty), luxury hotels, and high-end home furnishings. Within personal luxury goods, jewelry is expected to perform best in 2025 (growing 4%-6%), while more discretionary categories like footwear and apparel are projected to contract significantly by about 5%-7%. Besides significant divergence in luxury spending preferences among goods, the share of service experiences is also continuously rising, expected to reach 20% in 2025, with a 2019-2025E CAGR of 4%, continuing to outperform the overall market. The timing and strength of recovery for different high-end consumption categories are mainly determined by four dimensions: the proportion of VIC customers, the spending sequence/necessity level after wealth increase, supply elasticity, and consumption trends. The first three are short-term factors, while the fourth is a long-term factor that has been changing rapidly in recent years. From a sub-sector perspective, categories with strong initial necessity (referring to class-based or social necessities for affluent individuals) recover first. Categories with a large VIC customer base exhibit high elasticity later in the cycle, those with persistently favorable supply structures are the most enduring, those aligning with future consumption trends carry additional beta, and categories with more persistent wealth effects and more pronounced discretionary attributes will have greater elasticity.
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