China Securities Co., Ltd: High-end consumption revival, what to buy?

China Securities Co., Ltd. released a research report stating that with the wealth effect brought about by the rise in the stock market, high-end consumption in China has gradually recovered since Q3 2025. This has been validated by the performance of international luxury brands in the Greater China region and the recovery of high-end shopping malls. They are optimistic about the investment opportunities in the recovery of high-end consumption over the next 26 years. The timing and intensity of the recovery of different categories of high-end consumption are mainly determined by four dimensions: the proportion of VIC customer group, the consumption sequence/essentiality after wealth increase, supply elasticity, and consumption trends. Categories with strong early essentiality in high-end consumption (not referring to daily necessities, but rather the essentiality based on status/social needs of the high-end population) will recover first. Categories with a large proportion of VIC customers will have high elasticity in the later stages, and categories with a sustained good supply structure will be more enduring. The main viewpoints of China Securities Co., Ltd. are as follows: High-net-worth individuals are one of the main sources supporting high-end consumption, and the wealth effect brought about by the rise in the stock market has made a significant contribution to the recovery of high-end consumption. According to Bain data, there are approximately 300 million global luxury consumers in 2024, among whom 2%-3% core VIC users contribute over 40% of sales and this proportion is continuously increasing. Compared to the real estate market, the wealth effect of the stock market has been more pronounced in recent years. By the end of 2025, the A-share/Hong Kong market value reached 123 trillion yuan/4.8 trillion Hong Kong dollars, with a net increase of 24.5 trillion yuan/1.27 trillion Hong Kong dollars from the end of 2024. There are three verification points for the ongoing recovery of high-end consumption. 1) After a weak trend in 2024, international luxury brands began to recover gradually in Q2 2025. By Q3 2025, the revenue growth of various groups (excluding cloud) in the Asia-Pacific region has returned to positive growth, and the Chinese domestic market has also improved; 2) China's high-end retail properties began to recover at the end of 2024 and the beginning of 2025. For example, Pacific Place and HANG LUNG PPT entered a moderate recovery channel in 2025 after being under pressure in 2024, with gradually improving occupancy rates and sales trends, with luxury shopping malls performing even better. 3) The global luxury market also began to recover in Q3 2025. How to view the recovery pace and investment opportunities of various categories of high-end consumption: Looking back on the global luxury market in the past five years, according to Bain's data, the fastest-growing luxury categories from 2019 to 2025E are luxury cruises, private jets, high-end dining, personal luxury goods (leather goods, jewelry, shoes, clothing, cosmetics), luxury hotels, and high-end home furnishing. Among personal luxury goods, jewelry is expected to perform the best in 2025 (with a growth of 4%-6%), while categories like shoes and clothing will shrink by around 5%-7%. Apart from the significant differentiation in consumption trends among luxury goods categories, the proportion of service experiences is also steadily increasing, with luxury experiences accounting for 20% in 2025 and achieving a compound growth rate of 4% from 2019 to 2025E, continuing to outperform the overall market. The timing and intensity of the recovery of different categories of high-end consumption are mainly determined by four dimensions: the proportion of VIC customer group, the consumption sequence/essentiality after wealth increase, supply elasticity, and consumption trends, with the first three being short-term factors and the fourth being a long-term factor, but subject to rapid changes in recent years. From a sub-sector perspective, categories with strong early essentiality (not referring to daily necessities, but rather the essentiality based on status/social needs of the high-end population) will recover first, categories with a large proportion of VIC customers will have high elasticity in the later stages, and categories with a sustained good supply structure will be more enduring, with additional factors for categories in line with future consumption trends. Categories with stronger wealth effect sustainability and more prominent optional attributes will have greater elasticity.