After Hours Summary: ISRG +9%, UAL +2% higher on earnings; NFLX -0.7% slightly lower on earnings/guidance; CDW -9.1% falls on weak guidance; FOXA -0.4% settles lawsuit with DominionAfter Hours Gainers:
Companies trading higher in after hours in reaction to earnings/guidance: WAL +14.1%, ISRG +9%, FHN +2.1%, UAL +2%, OMC +1.4%
Companies trading higher in after hours in reaction to news: ORIC +2.1% (presents preclinical data on two programs), RF +1.4% (provides operational update at annual meeting), ZYME +0.7% (presents new data from multiple development programs), CAAP +0.4% (reports March traffic), PARA +0.2% (in sympathy with NFLX earnings), WBD +0.2% (in sympathy with NFLX earnings), RMAX +0.1% (provides update on March inventory)
After Hours Losers:
Companies trading lower in after hours in reaction to earnings/guidance: CDW -9.1% (guides Q1 sales below consensus), MRTN -6.2%, UCBI -5.1%, IBKR -3.4%, CENTA -2%, FULT -1.7%, NFLX -0.7%
Companies trading lower in after hours in reaction to news: FOXA -0.4% (settles lawsuit with Dominion), ROKU -0.4% (in sympathy with NFLX earnings), DIS -0.3% (in sympathy with NFLX earnings), RIG -0.2% (provides quarterly fleet status report), AJRD -0.1% (completes four RS-25 engines for NASA Artemis III mission), GOOG -0.1% (to launch its first foldable phone in June, according to CNBC)
Closing Stock Market SummaryToday's session was decidedly mixed under the index surface. The main indices had a lackluster showing, spending most of the day trading right around their flat lines. Investors were reacting to a slate of earnings news, some positive economic data, and commentary from a few Fed officials.
Briefly, St. Louis Fed President Bullard (not an FOMC voter) acknowledged the need to raise rates further since inflation remains persistently high and Atlanta Fed President Bostic (not an FOMC voter) said in a CNBC interview that he thinks the Fed should hike rates one more time and hold rates there "for quite some time."
Following their better-than-expected Q1 earnings, Bank of of America (BAC 30.56, +0.19, +0.6%) and Lockheed Martin (LMT 501.41, +11.77, +2.4%) were among the more influential winners today. BAC, which was down as much as 1.9% at one point, helped drive a 0.3% gain in the S&P 500 financial sector and LMT helped propel the industrials sector (+0.5%) to the top of the sector leaderboard.
Meanwhile, Dow components Johnson & Johnson (JNJ 161.01, -4.66, -2.8%) and Goldman Sachs (GS 333.91, -5.77, -1.7%) registered outsized losses following their earnings reports. Both companies reported better-than-expected Q1 earnings, but GS came up shy with its revenue.
Bank stocks in general were weak today as evidenced by the 1.3% decline in the SPDR Bank ETF (KBE) and the 2.2% decline in the SPDR Regional Bank ETF (KRE). Regional bank losses also weighed on the Russell 2000, which closed with a 0.4% loss.
Notably, homebuilders were a pocket of strength today after this morning's better-than-expected housing starts data from March, which was accented with welcome gains in both starts and permits for single family units. The SPDR Homebuilder ETF (XHB) was up 1.7% and the iShares U.S. Home Construction ETF (ITB) rose 2.3%.
The PHLX Semiconductor Index was another pocket of relative strength, up 0.4%, after NVIDIA (NVDA 276.67, +6.65, +2.5%) was upgraded to Buy from Reduce at HSBC.
Like stocks, Treasuries were mixed and little changed today. The 2-yr note yield was up three basis points to 4.21% and the 10-yr note yield slipped two basis points to 3.57%.
- Nasdaq Composite: +16.1% YTD
- S&P 500: +8.2% YTD
- Russell 2000: +3.1% YTD
- Dow Jones Industrial Average: +2.5% YTD
- S&P Midcap 400: +2.0% YTD
Reviewing today's economic data:
- Total housing starts might have declined 0.8% month to a seasonally adjusted annual rate of 1.420 million (consensus 1.407 million), but that was due to a decline in multi-unit starts. Single-unit starts were up 2.7% month-over-month to 861,000. Building permits, meanwhile, declined 8.8% month-over-month, driven by a 24.3% decline in permits for 5 units or more, whereas single-family permits increased 4.1% month-over-month to 818,000.
- The key takeaway from the report is the growth seen in single-family starts and single-family permits -- a leading indicator -- which is needed given the limited supply of existing homes for sale.
Abbott Labs (ABT), Ally Financial (ALLY), ASML (ASML), Baker Hughes (BKR), Bed Bath & Beyond (BBBY), Citizens Financial Group (CFG), Elevance Health (ELV), Morgan Stanley (MS), Synchrony Financial (SYF), Travelers (TRV), and U.S. Bancorp (USB) are among the more notable companies reporting earnings ahead of Wednesday's open.
Looking ahead to Wednesday, market participants will receive the following economic data:
- 7:00 ET: Weekly MBA Mortgage Index (prior 5.3%)
- 10:30 ET: Weekly crude oil inventories (prior 597,000)
- 14:00 ET: April Fed Beige Book
When Picasso, Chagall and Calder Collided With Fashion
A new London show highlights a golden moment, just after World War II, when modern art masters created works for Britain's top textile makers.
"Nude, 1947" by Patrick Heron, a screenprint on silk, part of a new show in London curated by Gray M.C.A.
LONDON — Fashion and art have long had an on-again, off-again relationship, and a new exhibition in London highlights a moment, just after World War II, when they were definitely on — and producing groundbreaking work.
“Styled by Design,” curated by Gray M.C.A, the fashion illustration, design and textiles gallery, highlights a colorful moment when British-based textile manufacturers worked with modern art giants to create fashion, home and decorative textiles.
The exhibition, which features rare and limited-edition textile designs by Pablo Picasso, Alexander Calder, Henry Moore, Barbara Hepworth and others, opens Tuesday and runs until April 30 at Cromwell Place in South Kensington.
The pioneers of the movement were Zika and Lida Ascher, a husband-and-wife team of textile experts who left their native Prague for England in 1939, shortly after Nazi Germany annexed Czechoslovakia.
Shortly after the war, Zika Ascher began brokering deals with the artists to create designs for textiles. He wanted to leave pain (and dreary aesthetics) of war behind and add a shot of color — and optimism — to people’s wardrobes. He also wanted to get the artists working again.
“La Mer, 1947,” a screen print on silk twill by Alexander Calder.
“This was real austerity: the artists weren’t finding the commissions and work they had before the war. The marketplace for art had evaporated. The big question was: ‘How do you get traction again?’ It was the same for fashion,” said Ashley Gray, director at Gray M.C.A.
Gray said Ascher and his contemporaries in the textile trade were eager to engage new audiences in Europe and the U.S., and they succeeded by pressing popular artists into action.
“Suddenly modern artists’ work was blossoming on the streets. Their art was being worn as clothing, or beautiful scarves. Modern art became democratized,” said Gray, adding that the show “celebrates the modernist view that ‘a good textile was the equal of a good painting.'”
In the years following the war, the Aschers developed relationships with a number of artists, giving them the freedom to create whatever they wanted. The Aschers then figured out how to make the designs work on a variety of fabrics such as cotton, rayon, silk and woven wool, and to ensure the colors and prints were just right.
“Kernoo, 1962,” a screen print on cotton by Victor Vasarely.
The trend for tapping top artists took off, and soon Moore was designing fabrics for costumes in Hollywood films; Claire McCardell was working Picasso’s fish prints into her dresses; and top models of the time were posing in Marc Chagall’s studio, wearing his dreamy prints and warm colors.
At one point, Zika Ascher even got Lucian Freud on board to design a crêpe de Chine fabric. In the meantime, the Aschers were also supplying fabrics — artistic and otherwise — to the likes of Christian Dior, Balmain and Balenciaga.
The famous Ascher silk squares, which featured original designs by artists including Ben Nicholson, Moore, Hepworth and André Derain, made their debut at the Dorchester hotel in London. They were framed, just like paintings, and made an international splash.
After their Dorchester debut, the silk squares embarked on a world tour, with exhibitions across Europe, South Africa and the U.S. “The series became a phenomenon,” said Gray, who has spent years scouring Europe and the U.S. for the textiles that feature in the show.
“Styled by Design” is a selling exhibition with prices ranging between 1,500 pounds and 170,000 pounds.
Among the highlights is a vast 1949 Ascher screen print on linen by Moore called “Two Standing Figures”; Nicholson’s 1937 “Vertical” for Edinburgh Weavers, a home furnishings maker near Manchester, England; and Patrick Heron’s “Nude” silk scarf, drawn while Heron worked for his father, Tom Heron at Cresta Silks.
“Frontispiece, 1963” a screen print on cotton by Pablo Picasso.
Gray said the frenzy of textile research, development — and creativity — in post-war Britain cannot be underestimated.
Ascher and his peers were not only making textiles, they were researching and developing dyes (before the war, most dyes were sourced from Germany) and experimenting with synthetic textiles.
“Machinery and mechanisms were changing quickly, and you could produce fabric economically,” said Gray, who described the 1950s as “the furnace of creativity” in Britain.
By the 1960s, that golden age of arty textiles was winding down.
A new generation of textile designers, influenced by abstract expressionist artists such as Mark Rothko and Willem de Kooning, were visiting art galleries, looking at museum catalogues in color, rather than in black and white, and creating painterly designs of their own.
“The light goes off the big artists, and the innovation starts to come from the art schools,” said Gray.
And — thanks to Zandra Rhodes, Celia Birtwell and others — the relationship between art, applied art, and fashion was evolving once again.
Credit Suisse Failed to Probe Nazi Past, Senate Committee Says
An investigation unearthed details of relationships with some high-ranking Nazis that the bank hadn’t disclosed previously
Credit Suisse Group AG CS -0.09% failed to fully investigate recent allegations that it supplied bank accounts to Nazi party members before and after World War II, and pushed aside an outside lawyer it had charged with overseeing an internal probe into the matter, according to a Senate committee investigation.
The Senate investigation was prompted by the Simon Wiesenthal Center, which in 2020 said it believed that there were accounts at Credit Suisse holding money looted from Jewish victims, based on a list it had of 12,000 Nazi party members and a Nazi-affiliated labor union in Argentina.
Credit Suisse is one of Switzerland’s oldest banks, founded in 1856, and its second-largest by assets. After a cascade of financial losses and scandals, it was forced into a rescue last month by larger rival UBS Group AG UBS -0.20% .
The Senate investigation reopens a painful chapter: Credit Suisse and other Swiss banks paid $1.25 billion two decades ago to settle claims and return money to families of Holocaust victims, as part of a period of soul searching in Switzerland that stirred up latent antisemitism and forced a reassessment around the country’s wartime behavior.
At the center of the Senate investigation are allegations by a lawyer the bank hired to oversee its probe of the Argentina list. He said Credit Suisse pulled back from fully exploring its Nazi links, including that it might have financed ratlines, or systems of escape for Nazi elites following the war, after having agreed to pursue leads.
The lawyer, Neil Barofsky, a partner at Jenner & Block LLP, said he was sidelined part way into the investigation, according to a report he provided to Credit Suisse after it ended his assignment last year. Credit Suisse said it continued the work without him.
Mr. Barofsky said Credit Suisse’s latest review unearthed details of relationships with some high-ranking Nazis that Credit Suisse hadn’t disclosed before, including when it and other Swiss banks entered a 1998 settlement with Holocaust victims.
Mr. Barofsky issued a report that said the bank found about 99 people of the thousands of names that were reviewed had accounts at some stage, with most opened in the decades following the war. Mr. Barofsky didn’t find any dormant or still-open accounts.
One such example was for an unidentified Nazi commander who had an account open until 2002. The amount of the account or reason for its closing wasn’t provided to the investigator.
Credit Suisse produced its own report on the matter, delivered to the committee last month, with additional details to some of Mr. Barofsky’s findings. It said the research had supplemented but not materially altered what was already known about the bank’s Nazi dealings.
The bank said Tuesday that investigators found no evidence to support the Simon Wiesenthal Center’s allegations that many individuals on the Argentina list had accounts during the Nazi period and said there was no evidence that eight Nazi-era accounts uncovered in the probe contained assets taken from Holocaust victims. After meetings with the Senate Budget Committee this month, Credit Suisse said it would probe its role in ratlines.
Credit Suisse said Mr. Barofsky had a limited engagement and that his report contains “numerous factual errors, misleading and gratuitous statements and unsupported allegations that are based on an incomplete understanding of the facts.” It said it hired a law firm to replace Mr. Barofsky for independent verification of its review’s findings.
A spokeswoman for Mr. Barofsky declined to comment.
The Credit Suisse review looked at a list of people either in the Nazi party or a related union in Argentina, representing a large chunk of the German population in the country at the time. The bank also repeated an earlier review of a separate list compiled by the Simon Wiesenthal Center in 1997 of senior Nazi officials. The center, a Jewish human-rights organization, has hunted former Nazis and sought reparations for victims of the Holocaust.
But rather than taking a complete reckoning, Credit Suisse backtracked on its earlier cooperation as more details emerged, Mr. Barofsky said in his report, which the Senate Budget Committee obtained and released on Tuesday.
Mr. Barofsky said the bank pulled back from earlier commitments in June last year, including for him to issue a public report, and terminated his contract in November. He said that left questions unanswered about the bank’s Nazi ties. Mr. Barofsky blamed his dismissal on the arrival of a new general counsel at Credit Suisse.
Mr. Barofsky formerly served as an assistant U.S. Attorney for the Southern District of New York and later held a role as a special inspector general overseeing the financial-crisis-era Troubled Assets Relief Program.
Senate Budget Committee Chairman Sheldon Whitehouse (D., R.I.) and Sen. Chuck Grassley of Iowa, the panel’s top Republican, issued a subpoena for the documents in March. The committee has jurisdiction over budget itemizations for the Office of the Special Envoy for Holocaust Issues, which is tasked with developing policies to return assets to their rightful owners and secure compensation for Nazi-era wrongs.
“While Credit Suisse initially agreed to investigate evidence of previously unidentified Nazi-linked accounts,” Mr. Grassley said in a written statement, “the information we’ve obtained shows the bank established an unnecessarily rigid and narrow scope, and refused to follow new leads uncovered during the course of the review.”
In 1998, Credit Suisse agreed to pay about one-third of a $1.25 billion settlement between Swiss banks and victims of Nazi persecution. The bank at the time provided information to panels set up in the U.S. and by the Swiss government, which found numerous examples of Credit Suisse aiding in persecution, including in the “Aryanization” of Jewish companies by forced transfers to non-Jewish owners.
However, those reviews didn’t fully explore Nazi-related accounts at the bank, and Credit Suisse hadn’t before reviewed the list of Nazis in Argentina for such ties.
Because of the country’s secrecy laws in place at the time of World War II, Swiss banks were a haven before the war for Jewish families and businesses, while also assisting Nazi organizations and officials in storing looted assets and moving money overseas.
Switzerland and its banks bought gold from the Nazi regime when other countries refused, and returned the assets and deposits of many Holocaust victims to their families only after lawsuits and sanctions threats by U.S. cities and states during the 1990s outcry.
Mr. Barofsky said some findings in the latest review raised questions about the accuracy of information that Credit Suisse gave to the 1990s-era panels. Researchers at the time had found that a holding company of enterprises tied to the Nazi SS, Adolf Hitler’s elite paramilitary unit, was a customer of the bank. The SS promoted the regime’s economic aims, including via seized Jewish businesses and labor from people in concentration camps. Credit Suisse had said at the time it couldn’t locate any records but accepted it was a bank client.
Mr. Barofsky in his report said an account document was found in the bank’s papers for the 1990s reviews. Credit Suisse, in its own report, said it found an account registry card with the crossed-out name of an SS officer, and that the information wasn’t picked up by the bank or by the Swiss panel studying the matter in the 1990s.
Nike Has a Plan to Take Digital Goods Mainstream. Just Don’t Call Them NFTs.
The sneaker giant is launching its first big collection of digital goods under its own name after signing up more than 330,000 members to its new web3 platform, .Swoosh.
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Nike is releasing its first big collection of virtual goods on its web3 platform, .Swoosh. (Nike)
Since Nike launched .Swoosh, its first big web3 play under its own name, late last year, it has been signing up members, holding contests and hosting events to educate people about the platform.
What it hasn’t been doing is throwing around words like “crypto” and “NFT,” even though, technically, NFTs — as in unique assets logged on a blockchain — are what its .Swoosh membership passes are. The same goes for its first collection of virtual products, a series of reimagined Air Force 1s dubbed Our Force 1, emphasising the community aspect of the project, releasing next month.
“Our approach around our virtual creations is, above all else, to provide a sense of utility and benefit, and not to be any speculative asset,” said Ron Faris, vice president and general manager of Nike Virtual Studios. “The underlying technology is what we find engaging to explain concepts like digital ownership, co-creation royalties — that’s what we find exciting because it allows us to reframe our relationship with our members.”
Four Nike members who won an online challenge that involved submitting a creative brief will have their ideas turned into virtual products for which they’ll receive royalties. It’s a “Nike first and very exciting for us,” Faris said. The company isn’t disclosing the royalty amount but the co-creators will receive a financial payout.
Public interest in NFTs has waned since the bottom fell out of the crypto market at the end of 2021, but even so, a number of fashion companies have continued to invest in NFT projects. Gucci even just signed a multi-year partnership with Yuga Labs, creator of Bored Ape Yacht Club. Typically, however, these efforts have focused on fan communities of 30,000 members or fewer, often with high price tags attached.
Nike’s .Swoosh members already number about 330,000, according to Faris, and it has deliberately sought out crypto novices as much as natives. The company held 15 .Swoosh events in different cities around the US, in locations such as New Orleans and the South Bronx in New York that Faris said have historically been last to get new technologies.
It makes Nike arguably one of the biggest forces onboarding new consumers into web3, even as it keeps the crypto part of it all in the background. Items from its new digital collection, for instance, will cost $19.82 — a reference to the year of the Air Force 1′s debut — payable by credit card but not cryptocurrency.
There will still be characteristically web3 elements to the drop. On April 18, Nike will send free virtual posters to select .Swoosh members who will then get first access to buy the digital items on May 8. A general access sale begins on May 10. Shoppers won’t buy a virtual sneaker but rather an Our Force 1 box, which they’ll later be able to open to reveal one of more than 100,000 variations of the Air Force 1, including plays on real AF1s the brand has released over the decades, newly augmented for the digital world. In one example, the “Citrus” AF1 twists above a glass, filling it with fresh orange juice.
The shoes will all be displayed in a gallery, though buyers can also leave their boxes closed if they prefer, like collectors with toys in sealed packaging. Buying and selling won’t be an option at first to give users time to get familiar with the products and avoid users buying shoes to flip at inflated prices, though Nike plans to share more details about how members will be able to buy from one another in the summer.
The virtual shoes will have different utilities, like access to physical products or experiences. Nike plans to make them wearable in certain online games as well, and it will let owners download the underlying 3D files so they can customise their items. In this regard, Nike is taking influence from RTFKT, the virtual product studio it acquired in 2021, which has encouraged its customers to learn 3D tools and get involved in the creation process.
Nike’s approach is meant to be beginner-friendly though. Several of the takes on past AF1s were selected by Nike’s online community over the past months in a series of tournament-like voting rounds. With its co-creation challenge, the company chose to have contestants submit creative briefs with themes and colour palettes rather than asking them to create virtual shoes because many of its members “don’t have access to the level of technology that’s needed to create 3D design,” Faris said. The company’s goal with .Swoosh is to “democratise” that sort of access, he said, noting .Swoosh started with the AF1 as its canvas because it’s the company’s “most democratic shoe.”
It’s also reportedly the brand’s top seller of all time. For a company as large as Nike, the world’s biggest sneaker maker, a niche project of a few thousand members will hardly move the sales needle. It benefits the brand to make its virtual products a mass play. While Faris said they’re still in a test-and-learn phase to see how customers engage with the digital goods, it’s evident Nike sees an opportunity worth exploring.
“We believe that there’s a great appetite for us to create this marketplace in the future that meets the consumer where they are across digital realms or physical realms, harmonizing products, services and experiences,” Faris said. “As we learn more, we’ll see where that takes us.”
Wealthy Chinese Flock to High-Octane Shopping Hubs
Luxury brands could see an uplift in destinations like Dubai, Singapore and Australia’s Gold Coast as China’s second outbound tourism wave gets underway.
KEY INSIGHTS
- Mainlanders are travelling further afield in the Asia-Pacific region after returning to nearby hubs like Macau, Hong Kong, Tokyo and Seoul earlier this year.
- Second-wave travel hotspots like Singapore double as places where ultra-wealthy Chinese can offshore money through business and property investments.
- Dubai is benefitting from the right mix of flights, luxury retail and hotel capacity, while Australia’s unique offering makes it more attractive after the pandemic.
If the first wave of China’s travel recovery story was about short-haul flights to cities that gave people immediate relief after three years of cabin fever, the second wave is a more nuanced affair. Still motivated by escapism following the lifting of zero-Covid restrictions, mainlanders are now starting to travel further afield but mostly within the Asia-Pacific region, often to familiar but decadent destinations.
While Hong Kong became accessible to mainland Chinese late last year, and Japan was especially popular during last month’s cherry blossom season, Chinese travel agency Trip.com has also identified Thailand, Singapore, Australia and South Korea as some of the most-booked outbound destinations for Chinese travellers in March. In a McKinsey survey from the same month, 40 percent of Chinese travellers said they wanted their next trip to be international.
But it’s not until this quarter or the second half of the year that most destinations will see a bigger wave of outbound visitors, said the China Outbound Tourism Research Institute (COTRI). It’s forecasting 110 million outbound trips from the mainland this year which is just two-thirds of the traffic seen in 2019.
What do the latest travel patterns mean for global luxury brands and especially those reliant on tourists in their European stores?
Global Blue, the duty-free tax refund company, said that in March mainland Chinese spending in Europe had reached nearly half of what it was in 2019, a big rise from the 22 percent seen in the first two months of the year. While this is encouraging, it is still a far cry from the pre-pandemic levels brands enjoyed when throngs of Chinese shoppers regularly filled stores along Paris’ Avenue Montaigne and Milan’s Via Montenapoleone.
The recovery is expected to gradually strengthen in the months ahead but the COTRI predicts that Chinese outbound travel won’t overtake pre-Covid levels until next year. Capacity issues will continue to hinder progress until then. A significant backlog in Chinese passport renewals and fewer flights have made it difficult or, at the very least, more expensive to travel.
A shortage of routes into China means global inbound flights for March are at 15 percent of 2019 levels, according to aviation data firm Cirium. While Chinese carriers were able to ramp up capacity relatively quickly after China reopened earlier this year, European airlines have been slower to relaunch routes into the country because a Russian ban on using its airspace forces them to use longer routes, increasing fuel and staffing costs.
But luxury brands with a global footprint could potentially recoup some of the foregone Chinese sales in Europe and the US elsewhere. In addition to their retail networks in the mainland which are likely to continue to benefit from the repatriation of spending in the short-term, brands with stores in other regions could help satisfy some of the pent-up demand for overseas shopping.
Routes from China to the Middle East, especially via UAE-flag carrier Emirates Airlines, are recovering fast, according to a Barclays report predicting Chinese tourists will provide a boost to Middle East luxury sales this year.
“Looking at flight data, it is clear that travel from mainland China towards Dubai is recovering at a much faster pace than towards Europe since year to date, thanks to higher flight capacity and targeted marketing campaigns from the city towards Chinese tourists,” Barclays analyst Yasmin Clark, said in a note.
Pre-pandemic, Chinese tourists drove around 10 to 15 percent of luxury sales in Dubai, the note estimates. “Daily flights have resumed from Guangzhou since February 1st, from Shanghai since March 1st, and from Beijing since March 15th. Still facing very limited flights towards Europe, we think the UAE presents itself as an attractive alternative destination in coming months for Chinese travellers,” Clark said.
Dubai Tourism has been proactively courting the Chinese traveller again and the UAE is a country where Chinese tourists can enjoy visa-free travel. In other popular shopping destination countries, visas can be a significant barrier.
The UAE has a strong relationship with China, said John Zhang, the UAE representative for the Shanghai Chamber of International Commerce. This has helped Chinese tourists feel welcome and secure there at a time when geopolitical tensions with the US and some European countries have been on the rise. But it’s not all about the bigger picture; practical initiatives at company level help too.
“Emaar recently launched a Chinatown in Dubai Mall complete with Haidilao and other famous Chinese brands,” Zhang said.
The colossal mall, where Balenciaga, Balmain and Burberry are present alongside dozens of other luxury brands, signed a deal with Alibaba’s digital wallet Alipay in 2018 to make itself more attractive to inbound Chinese. In neighbouring Saudi Arabia, the tourism authority’s new partnership with Unionpay, the dominant Chinese card provider, has also led to more interest from the mainland.
The Middle East offers impressive landmarks and novel experiences to Chinese tourists, while providing a degree of familiarity at retail and hospitality establishments. Shopping can be done efficiently under one roof at megamalls like those back home and the scale and aesthetic of leisure facilities like water parks are often similar too.
Australia’s Gold Coast is another destination that is rising in popularity among the Chinese.
Although it’s a much smaller contribution in spending compared to the nation’s two largest cities Sydney and Melbourne, the tropical environs of Surfers Paradise so close to major brands like Chanel, Gucci and Louis Vuitton at Pacific Fair Shopping Centre, where many of retail store staff have been selected for Mandarin speaking skills, has caught the attention of Chinese travellers. Meanwhile, nearby Harbour Town is a go-to for outlet shopping.
While much of the draw of going to Europe is getting the best prices for luxury in brands’ home markets, Australia is a popular option “if you’re looking for a more holistic trip where you can… shop but you can do things outdoors [and] all of that,” said Katie Thomas, who leads the Kearney Consumer Institute.
The country’s famous beaches, unique wildlife, natural landscapes, fresh cuisine and reputation for a healthy lifestyle provide a compelling mix, especially since wellness became top of mind to many Chinese after enduring the pandemic.
It’s not just short-term sightseeing in Australia that is spurring spending but stays for higher education or even relocation that can provide a longer-term boost. Upper- and middle-class Chinese with the means to do so have been looking to invest or emigrate outside of China after a tough three years under strict zero-Covid measures.
Typically, Canada would feature as a top alternative but at the start of the year it implemented a two-year ban on foreign property buyers, including the Chinese, aimed at cooling its housing market. Escalating tensions between the China and the US on everything from microchips to TikTok and mainlanders’ fears over American gun violence have deterred many from going there. Australian destinations are closer to China than most in North America and it provides a larger Chinese diaspora than Europe which means Chinese culture is also more prevalent in some of its cities.
But Singapore, by far, is the most popular place for Chinese looking to transfer their wealth. The city-state, often dubbed “Asia’s Switzerland” offers a low tax rate with both geographical proximity and Mandarin as an official language, in addition to permanent residency for anyone investing 2.5 million Singapore dollars ($1.8 million). As a hub for both investment and wealth management, Singapore’s number of family offices surged to about 700 in 2021 from 400, driven mainly by an uptick in mainland Chinese.
As wealthy mainlanders poured into the real estate market snapping up second or third homes, Singapore’s home prices soared 14 percent in 2022, according to data from real estate brokerage Knight Frank, while prices in Hong Kong fell by single digits. Traditionally, Hong Kong provided many of the same benefits and it still captures a lot of the transfer of assets but Singapore has been catching up to its appeal because of the political protests seen in Hong Kong in recent years.
According to the Hurun Report, which tracks the habits of wealthy Chinese, the “preferred overseas investment destination has moved from London to Singapore and Hong Kong” in the last year. Among ultra-high net worth individuals, it found that Dubai and Singapore were among the fastest growing trip destinations.
China’s reopening has already started to force the pendulum of Chinese luxury spending to swing back from the extreme position of 90 percent domestic sales in 2020 and 2021 during zero-Covid measures, but it will not return to the pre-pandemic starting position, suggests Flavio Cereda, head of luxury research at Jefferies.
Over time, brands will most likely see “a reversal of the pre-pandemic dynamic” where the majority of luxury spend took place overseas. In other words, while overseas purchases made up around 65 percent of the overall luxury spend by the Chinese in 2019, he expects domestic purchases to account for 65 percent by 2026.
This underscores an important point for brands tracking shifts in Chinese travel patterns. However important it is to anticipate new traffic to cities like Dubai and Singapore, especially in the short-term, brands should not lose sight of the investments they need to make longer-term to capture domestic spend rising in the mainland.
Wealthy Chinese Flock to High-Octane Shopping Hubs
Luxury brands could see an uplift in destinations like Dubai, Singapore and Australia’s Gold Coast as China’s second outbound tourism wave gets underway.
KEY INSIGHTS
- Mainlanders are travelling further afield in the Asia-Pacific region after returning to nearby hubs like Macau, Hong Kong, Tokyo and Seoul earlier this year.
- Second-wave travel hotspots like Singapore double as places where ultra-wealthy Chinese can offshore money through business and property investments.
- Dubai is benefitting from the right mix of flights, luxury retail and hotel capacity, while Australia’s unique offering makes it more attractive after the pandemic.
If the first wave of China’s travel recovery story was about short-haul flights to cities that gave people immediate relief after three years of cabin fever, the second wave is a more nuanced affair. Still motivated by escapism following the lifting of zero-Covid restrictions, mainlanders are now starting to travel further afield but mostly within the Asia-Pacific region, often to familiar but decadent destinations.
While Hong Kong became accessible to mainland Chinese late last year, and Japan was especially popular during last month’s cherry blossom season, Chinese travel agency Trip.com has also identified Thailand, Singapore, Australia and South Korea as some of the most-booked outbound destinations for Chinese travellers in March. In a McKinsey survey from the same month, 40 percent of Chinese travellers said they wanted their next trip to be international.
But it’s not until this quarter or the second half of the year that most destinations will see a bigger wave of outbound visitors, said the China Outbound Tourism Research Institute (COTRI). It’s forecasting 110 million outbound trips from the mainland this year which is just two-thirds of the traffic seen in 2019.
What do the latest travel patterns mean for global luxury brands and especially those reliant on tourists in their European stores?
Global Blue, the duty-free tax refund company, said that in March mainland Chinese spending in Europe had reached nearly half of what it was in 2019, a big rise from the 22 percent seen in the first two months of the year. While this is encouraging, it is still a far cry from the pre-pandemic levels brands enjoyed when throngs of Chinese shoppers regularly filled stores along Paris’ Avenue Montaigne and Milan’s Via Montenapoleone.
The recovery is expected to gradually strengthen in the months ahead but the COTRI predicts that Chinese outbound travel won’t overtake pre-Covid levels until next year. Capacity issues will continue to hinder progress until then. A significant backlog in Chinese passport renewals and fewer flights have made it difficult or, at the very least, more expensive to travel.
A shortage of routes into China means global inbound flights for March are at 15 percent of 2019 levels, according to aviation data firm Cirium. While Chinese carriers were able to ramp up capacity relatively quickly after China reopened earlier this year, European airlines have been slower to relaunch routes into the country because a Russian ban on using its airspace forces them to use longer routes, increasing fuel and staffing costs.
But luxury brands with a global footprint could potentially recoup some of the foregone Chinese sales in Europe and the US elsewhere. In addition to their retail networks in the mainland which are likely to continue to benefit from the repatriation of spending in the short-term, brands with stores in other regions could help satisfy some of the pent-up demand for overseas shopping.
Routes from China to the Middle East, especially via UAE-flag carrier Emirates Airlines, are recovering fast, according to a Barclays report predicting Chinese tourists will provide a boost to Middle East luxury sales this year.
“Looking at flight data, it is clear that travel from mainland China towards Dubai is recovering at a much faster pace than towards Europe since year to date, thanks to higher flight capacity and targeted marketing campaigns from the city towards Chinese tourists,” Barclays analyst Yasmin Clark, said in a note.
Pre-pandemic, Chinese tourists drove around 10 to 15 percent of luxury sales in Dubai, the note estimates. “Daily flights have resumed from Guangzhou since February 1st, from Shanghai since March 1st, and from Beijing since March 15th. Still facing very limited flights towards Europe, we think the UAE presents itself as an attractive alternative destination in coming months for Chinese travellers,” Clark said.
Dubai Tourism has been proactively courting the Chinese traveller again and the UAE is a country where Chinese tourists can enjoy visa-free travel. In other popular shopping destination countries, visas can be a significant barrier.
The UAE has a strong relationship with China, said John Zhang, the UAE representative for the Shanghai Chamber of International Commerce. This has helped Chinese tourists feel welcome and secure there at a time when geopolitical tensions with the US and some European countries have been on the rise. But it’s not all about the bigger picture; practical initiatives at company level help too.
“Emaar recently launched a Chinatown in Dubai Mall complete with Haidilao and other famous Chinese brands,” Zhang said.
The colossal mall, where Balenciaga, Balmain and Burberry are present alongside dozens of other luxury brands, signed a deal with Alibaba’s digital wallet Alipay in 2018 to make itself more attractive to inbound Chinese. In neighbouring Saudi Arabia, the tourism authority’s new partnership with Unionpay, the dominant Chinese card provider, has also led to more interest from the mainland.
The Middle East offers impressive landmarks and novel experiences to Chinese tourists, while providing a degree of familiarity at retail and hospitality establishments. Shopping can be done efficiently under one roof at megamalls like those back home and the scale and aesthetic of leisure facilities like water parks are often similar too.
Australia’s Gold Coast is another destination that is rising in popularity among the Chinese.
Although it’s a much smaller contribution in spending compared to the nation’s two largest cities Sydney and Melbourne, the tropical environs of Surfers Paradise so close to major brands like Chanel, Gucci and Louis Vuitton at Pacific Fair Shopping Centre, where many of retail store staff have been selected for Mandarin speaking skills, has caught the attention of Chinese travellers. Meanwhile, nearby Harbour Town is a go-to for outlet shopping.
While much of the draw of going to Europe is getting the best prices for luxury in brands’ home markets, Australia is a popular option “if you’re looking for a more holistic trip where you can… shop but you can do things outdoors [and] all of that,” said Katie Thomas, who leads the Kearney Consumer Institute.
The country’s famous beaches, unique wildlife, natural landscapes, fresh cuisine and reputation for a healthy lifestyle provide a compelling mix, especially since wellness became top of mind to many Chinese after enduring the pandemic.
It’s not just short-term sightseeing in Australia that is spurring spending but stays for higher education or even relocation that can provide a longer-term boost. Upper- and middle-class Chinese with the means to do so have been looking to invest or emigrate outside of China after a tough three years under strict zero-Covid measures.
Typically, Canada would feature as a top alternative but at the start of the year it implemented a two-year ban on foreign property buyers, including the Chinese, aimed at cooling its housing market. Escalating tensions between the China and the US on everything from microchips to TikTok and mainlanders’ fears over American gun violence have deterred many from going there. Australian destinations are closer to China than most in North America and it provides a larger Chinese diaspora than Europe which means Chinese culture is also more prevalent in some of its cities.
But Singapore, by far, is the most popular place for Chinese looking to transfer their wealth. The city-state, often dubbed “Asia’s Switzerland” offers a low tax rate with both geographical proximity and Mandarin as an official language, in addition to permanent residency for anyone investing 2.5 million Singapore dollars ($1.8 million). As a hub for both investment and wealth management, Singapore’s number of family offices surged to about 700 in 2021 from 400, driven mainly by an uptick in mainland Chinese.
As wealthy mainlanders poured into the real estate market snapping up second or third homes, Singapore’s home prices soared 14 percent in 2022, according to data from real estate brokerage Knight Frank, while prices in Hong Kong fell by single digits. Traditionally, Hong Kong provided many of the same benefits and it still captures a lot of the transfer of assets but Singapore has been catching up to its appeal because of the political protests seen in Hong Kong in recent years.
According to the Hurun Report, which tracks the habits of wealthy Chinese, the “preferred overseas investment destination has moved from London to Singapore and Hong Kong” in the last year. Among ultra-high net worth individuals, it found that Dubai and Singapore were among the fastest growing trip destinations.
China’s reopening has already started to force the pendulum of Chinese luxury spending to swing back from the extreme position of 90 percent domestic sales in 2020 and 2021 during zero-Covid measures, but it will not return to the pre-pandemic starting position, suggests Flavio Cereda, head of luxury research at Jefferies.
Over time, brands will most likely see “a reversal of the pre-pandemic dynamic” where the majority of luxury spend took place overseas. In other words, while overseas purchases made up around 65 percent of the overall luxury spend by the Chinese in 2019, he expects domestic purchases to account for 65 percent by 2026.
This underscores an important point for brands tracking shifts in Chinese travel patterns. However important it is to anticipate new traffic to cities like Dubai and Singapore, especially in the short-term, brands should not lose sight of the investments they need to make longer-term to capture domestic spend rising in the mainland.