Korean stocks soar, and the "big winner" turns out to be European luxury goods.

After the South Korean stock market (KOSPI) soared this year, a wealth effect is quietly reshaping the map of luxury consumption in Asia.

On February 27, according to Zhuifeng Trading Desk, UBS pointed out in its latest research report that South Korean luxury demand is showing a clear inflection point—the same store sales growth of department stores accelerated to 15% in the fourth quarter of 2025, inbound Chinese tourists surged, combined with a price arbitrage window brought by the depreciation of the Korean won against the RMB. With the resonance of these three driving forces, the Korean market is expected to become the most important marginal incremental source for the European luxury industry recently.

The report pointed out that the most critical signal is: This means that European luxury companies with high exposure in the Korean market, such as Hermès, Moncler, Prada, and Burberry, are likely to become the main beneficiaries. Currently, the valuation of the European luxury sector has fallen to the bottom of the historical relative valuation range, and any confirmation of sustained demand improvement could lead to a revaluation of the sector.

Korean Consumers: The Strategic Piece That Cannot Be Ignored in the Luxury Industry

The report noted that Korean consumers occupy a unique position in the global luxury landscape.

According to UBS estimates and company disclosures, the Korean market contributes an average mid-to-high single digit percent (MSD to HSD%) to luxury group sales revenues.

UBS stated that more importantly, Korean consumers are recognized by the industry as "highly mature and trendsetting," and their consumption trends serve as a significant indicator for the whole Asian region.

Especially in the current post-pandemic era when luxury demand is weak, the Korean market, because it did not undergo strict lockdowns during the pandemic, has maintained a relatively independent consumption rhythm and has become an important leading indicator for observing the direction of luxury demand in Asia.

Triple Driving Forces: Where Does the Demand Inflection Point Come From?

UBS’s research report identified three core factors driving the improvement of luxury demand in South Korea:

First, the stock market wealth effect. The Korean Composite Stock Price Index (KOSPI) rose more than 40% within the year (about 76% for the full year 2025), and local Koreans’ participation in the stock market is higher than the Asian average. Stock price increases directly boost residents’ perceived wealth and stimulate their willingness to engage in high-end consumption.

Second, a surge in Chinese inbound tourists. South Korea has implemented a visa-free entry policy for Chinese tour groups, and, due to ongoing geopolitical tensions between China and Japan, a large number of Chinese tourists have shifted their consumption destination from Japan to Korea. Data from the Korea Duty Free Shops Association shows that as of January 2026, the number of inbound tourists has obviously rebounded.

Third, the opening of the currency arbitrage window. The continuous weakening of the Korean won against the RMB has greatly increased the attractiveness of local luxury prices in Korea. As of January 2026, luxury prices in Korea have basically matched those in Europe, while in January 2025, Korean prices were still about 13% higher than in Europe. The elimination of this price difference has attracted Chinese tourists to shop in Korea and also stimulated purchasing enthusiasm among local Korean consumers.

Data Verification: Accelerating Department Store Sales, Clear Inflection Signals

UBS pointed out that, from a hard data perspective, same store sales growth in South Korean department stores is showing a clear acceleration: in the first three quarters (9M), the growth rate was in the mid single digits (MSD), while in the fourth quarter of 2025 it jumped to 15%, showing a marked acceleration trend.

Meanwhile, several luxury brands made positive comments about the Korean market during their earnings calls for the fourth quarter of 2025, further confirming the sustained improvement in demand.

Who Are the Biggest Beneficiaries? A Ranking of Korean Exposure

Based on UBS estimates and company disclosures, the sales exposure of various luxury companies in the Korean market in 2025 is as follows:

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

Based on these data, UBS believes that Hermès (Neutral), Moncler (Buy), Prada (Neutral), and Burberry (Buy) are most likely to benefit from the recovery in Korean demand.

From a valuation perspective, the current European luxury sector’s premium over the MSCI Europe index (excluding Hermès) is about 58%, essentially in line with the 15-year historical average, but significantly lower than the 5-year average of about 75%.

UBS believes that the current sector valuation is already at the bottom of the historical relative valuation range. Once the signal of sustained improvement in Korean market demand is further confirmed, it is expected to become an important catalyst to trigger the sector’s valuation repair to the top of the range.

~~~~~~~~~~~~~~~~~~~~~~~~

The above wonderful content comes from Zhuifeng Trading Desk.

For more detailed analysis, including real-time interpretation and frontline research, please join 【Zhuifeng Trading Desk ▪ Annual Membership】

Risk Warning and DisclaimerThe market entails risks; investments require caution. This article does not constitute personal investment advice, nor does it take into account individual users’ specific investment goals, financial circumstances, or needs. Users should consider whether any opinions, views, or conclusions in this article are suitable for their particular situation. Investing based on this information is at your own risk.