The holiday season has arrived in full in the West, but the global holiday season runs much longer than that. China’s “golden week” already took place in October, while Chinese New Year doesn’t occur until February. Those holidays provide investors with an opportunity in a global luxury ETF like the KraneShares Global Luxury Index ETF (KLXY).
KLXY tracks global luxury brand names with consumer bases in China as well as the U.S. That provides it with exposure to a growing, youthful middle class in China while also limiting exposure to headwinds like China’s real estate debt situation. In fact, it holds no Chinese firms, but does set a minimum of 40% of assets invested in businesses outside the U.S.
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What, then, does the global holiday season look like, spending wise, in 2023? The U.S.-based National Retail Federation projects a 3% to 4% sales increase year-over-year, excluding automobiles, gasoline, or restaurants. Meanwhile, China already saw a “consumption boom” during the so-called “golden week” holiday in October this year. With Chinese consumers sitting on a savings glut, the Chinese New Year could kick off a better year for consumer spending overall.
A global luxury ETF like KLXY could, then, be a strong option to consider as 2023 draws to a close. The strategy holds prominent names like LVMH Moet Hennessy Louis Vuitton (LVMUY) at more than 10%. It not only holds names in the U.S. and France, but also Japan and Italy.
KLXY launched just this past September, tracking the Solactive Global Luxury Index for a 69 basis point (bps) fee. For those looking for exposure to China and other consumer markets without direct China exposure, KXLY may appeal, returning 2.7% in the last month.
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