Cash in on China’s Luxury Spending Boom

Video Transcript

Hi, this is Tony Sagami for Uncommon Wisdom Daily.

When I was a stockbroker at Merrill Lynch back in the 1980s, I remember getting an angry lecture from my manager about the cheap Timex watch I was wearing. He insisted that in order to make it in that business, I needed to wear an expensive designer watch, like a Rolex or a Hublot.

Well, I never did buy a designer watch. But I understand that it’s still a must-have for a lot of people. That’s why thousands of consumers and dealers descended on Basel, Switzerland last week to attend the world’s biggest watch exhibition, the Baselworld Watch and Jewelry Show.

The star of this year’s show was the world’s most expensive watch, a Hublot encrusted with 1,282 diamonds. It took 17 people 14 months to set the 140-carats worth of diamonds on the white gold watch. The price tag? About $5 million!

The watch hasn’t found a buyer yet, but a Hublot spokesman said they had several serious inquiries and expect to sell it soon. This is just another example proving that despite the still-struggling global economy, consumers at the very high-end of the retail market are doing just fine. So as an investor, watching the shopping habits of the top 1% is a good way to rake in the profits.

One place where the top 1% are doing especially well is China. According to McKinsey & Company, China will be the largest luxury goods market in the world by 2015, accounting for more than 20% of global sales.

Watches are among the most popular purchases for China’s biggest spenders. The watch division of LVMH Moet Hennessey enjoyed record sales in 2011 and is expecting an even better 2012. Its Hublot watches sell for an average of $24,000 a piece.

But it’s not just watches. Luxury handbag maker Coach just reported a blowout quarter, thanks in large part to Chinese sales. And the company plans to open 30 more stores a year in China over the next three years.

Meanwhile, BMWs have become the most popular luxury car brand in China, because the company realized that a lot of Chinese owners are chauffeured around, so they increased the legroom in the backseat. As a result, BMW’s sales in China jumped 38%, leading to record profits.

One way to profit from this luxury spending boom is by investing directly in the shares of the retailers that are doing big business in China and its Asian neighbors. That’s exactly what subscribers to my Asia Stock Alert have been doing.

But there are also several ETFs that focus on consumer discretionary stocks, including names like Coach, Wynn Resorts and Tiffany.

Now, I’m not suggesting that you rush out and buy anything tomorrow. As always, timing is everything, so wait for my buy signal in Asia Stock Alert. Who knows, maybe you’ll make enough to buy that $5 million dollar Hublot watch. You just might have to bid against a Chinese zillionaire to get it.

I’m Tony Sagami for Uncommon Wisdom Daily. Thanks for watching.

Tony Sagami is the editor of The Asian Century, a trading service designed to help investors profit from the seemingly unstoppable Asian consumption machine. He helps his subscribers tap into this potential through a variety of easy-to-execute strategies on global companies that trade on the U.S. exchanges that also do big business in Asia. For more information on The Asian Century, click here.

Tony is also the editor of International ETF Trader, where he shows members how to make money from trends taking place all over the world in areas like natural resources, gold, oil, commodities, tech, consumer goods and even in individual countries themselves.