Shares of luxury goods companies Kering SA, Compagnie Financière Richemont SA and LVMH Moët Hennessy Louis Vuitton SE climbed more than 3% in lunchtime trading in Europe on Sept. 4 after news broke that Hong Kong would withdraw the extradition bill that stirred three months of unrest in the Asian financial hub.
Embattled Hong Kong leader Carrie Lam in a televised address announced the formal withdrawal of the extradition bill, which will allow suspects to be sent back to mainland China.
Violent clashes between demonstrators and police that began in mid-June have crippled the city's retail industry, sending sales of luxury items down 24.4% year over year in July.
Luxury groups including Kering, Tiffany & Co. and Prada SpA, as well as cosmetics giant L'Oréal SA, warned during their recent quarterly earnings that the protests could hurt their sales and earnings for the second half of 2019.
Hong Kong's lack of sales tax and close geographic proximity to mainland China has contributed to its rise as a shopping haven for mainland visitors.
Hong Kong-listed Prada closed 3.18% higher on Sept. 4, while Hong Kong's benchmark Hang Seng Index rose 4% after news of the withdrawal became public. Hong Kong property stocks including Sun Hung Kai Properties Ltd., which owns shopping malls affected by the protests, closed nearly 10% higher.
"The news is especially good because the assumption at this point could be that the unrest would stop and we would go back to business as usual," Luca Solca, senior research analyst for luxury goods at Bernstein, told S&P Global Market Intelligence.
"Whether this assumption will sustain or not, we will see how protesters take the news. I presume they would take it positively but this is what we know at this stage," he added.
The withdrawal of the extradition bill was only one of the five demands made by the protesters. Lam and her government did not directly address the other key demand for an independent inquiry into alleged police brutality against the demonstrators.
