Korean stocks soar, and the "big winner" is actually European luxury goods

After the Korean stock market (KOSPI) surged this year, a wealth effect is quietly reshaping Asia’s luxury goods consumption landscape.

On February 27, according to Wind Trading Platform, UBS stated in a recent research report that the demand for luxury goods in Korea is showing a clear turning point—department store same-store sales growth is expected to accelerate to 15% in Q4 2025. The influx of Chinese tourists, combined with the won’s relative depreciation against the RMB creating a price arbitrage window, is resonating as a triple driving force. As a result, Korea is likely to become the most significant marginal growth source for the European luxury industry in the near term.

The report highlights that the key signal is: European luxury companies with high exposure in Korea, such as Hermès, Moncler, Prada, and Burberry, are poised to be the main beneficiaries. Currently, the valuation of the European luxury sector has fallen to the bottom of its historical relative valuation range, and any news confirming sustained demand improvement could trigger a revaluation of the sector.

Korean Consumers: An Unmissable Strategic Player in the Luxury Industry

The report notes that Korean consumers hold a unique position in the global luxury landscape.

Based on UBS estimates and disclosed data from various companies, Korea contributes an average of mid-to-high single-digit percentages (MSD to HSD%) to the total sales of luxury groups.

UBS states that more importantly, Korean consumers are recognized by the industry as “highly mature and trendsetting,” and their consumption trends serve as a significant barometer for the entire Asian region.

Especially in the current post-pandemic era, where luxury demand remains weak, Korea’s market has maintained a relatively independent consumption rhythm because it did not experience strict lockdowns during the pandemic, making it an important leading indicator for the direction of luxury demand in Asia.

Triple Driving Forces: Where Does the Demand Turn Come From?

UBS’s research identifies three core factors driving the improvement in Korea’s luxury demand:

First, the wealth effect from the stock market. The Korea Composite Stock Price Index (KOSPI) has risen over 40% year-to-date (with an estimated full-year increase of about 76%), and local residents’ participation in the stock market is higher than the Asian regional average. Rising stock prices directly boost residents’ wealth perception, stimulating high-end consumption.

Second, a surge in Chinese inbound tourists. Korea has implemented visa-free entry policies for Chinese tour groups. Coupled with ongoing geopolitical tensions between China and Japan, many Chinese tourists are shifting their spending destinations from Japan to Korea. Data from the Korea Duty-Free Association shows that inbound tourist numbers in January 2026 have already rebounded significantly.

Third, the opening of the currency arbitrage window. The continued weakening of the won against the RMB has greatly increased the attractiveness of Korean luxury goods prices. As of January 2026, Korean luxury prices are roughly on par with Europe, whereas in January 2025, Korean prices still carried about a 13% premium over Europe. This price gap elimination not only attracts Chinese tourists to shop in Korea but also stimulates local Korean consumers’ purchasing willingness.

Data confirms: department store sales accelerate, signaling a clear turning point

UBS points out that hard data shows a clear acceleration in same-store sales growth at Korean department stores: in the first three quarters (9M), growth was in the mid-single digits (MSD), while in Q4 2025, it surged to 15%, indicating a significant acceleration.

Meanwhile, several luxury brands expressed positive comments about the Korean market during their Q4 2025 earnings calls, further confirming the ongoing demand recovery.

Who Are the Biggest Beneficiaries? A Snapshot of Korea Exposure

Based on UBS estimates and company disclosures, the sales exposure of various luxury brands in Korea in 2025 is approximately:

• Hermès, Moncler, Prada: about 9%
• Burberry: about 8%
• Salvatore Ferragamo: about 7%
• Kering, Richemont: about 6%
• LVMH, Swatch: about 5%
• Zegna: about 4%
• Brunello Cucinelli: about 3%
• Hugo Boss: about 2%
• Pandora, EssilorLuxottica: about 1%

Based on these figures, UBS believes Hermès (neutral), Moncler (buy), Prada (neutral), and Burberry (buy) are most likely to benefit from the demand rebound in Korea.

From a valuation perspective, the current European luxury sector’s premium over the MSCI Europe Index (excluding Hermès) is about 58%, roughly in line with the 15-year historical average, but significantly below the 75% level of the past five years.

UBS believes that the current sector valuation is at the bottom of its historical relative valuation range. Once further signals of sustained demand improvement in Korea are confirmed, it could serve as a key catalyst for sector valuation to recover toward the upper end of the range.

This insightful content is from Wind Trading Platform.

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