In October, the worlds' second-largest economy reported growth of 6.7% for the third consecutive quarter and although the figures are sometimes disputed, a number of luxury companies reported an uptick in trading in China during the same periods.
Peter Gamry, head of equity strategy at Saxo Bank, wrote in a recent blog post that if China's GDP data is correct, "luxury growth (and thus luxury stocks) will go up, and likely faster than the overall equity market."
He attributed this to accelerated invested capital growth by luxury houses as economies accelerate. The luxury industry tends to consistently deliver some of the highest return on invested capital ratios, reaching more than 20%, "the industry on average delivers 2.5 times as much return as it pays for capital."
"On average, the industry is fairly valued with an enterprise value to invested capital ratio at around 3.2 and thus we see no major downside risk unless the global economy deteriorates from here," Gamry added.
The luxury industry is also able to extract good profits because wealthy consumers are less price-sensitive and willing to pay a premium for brands.
French luxury brand Hermes (HESAY) , best known for its signature scarves and Birkin bags, reported more than 14% growth in Asia pacific sales due in large part to growth in China in its last quarter reported in November.