Go to the Globe and Mail homepage

Jump to main navigationJump to main content

Globe Investor

Inside the Market

Up-to-the-minute insights
on developing market news

Entry archive:

Chinese Premier Wen Jiabao adjusts his earphone upon arriving for the opening of the World Economic Forum's 'Annual Meeting of the New Champions' in Tianjin, China, Tuesday, Sept. 11, 2012. (Andy Wong/Associated Press)

Chinese Premier Wen Jiabao adjusts his earphone upon arriving for the opening of the World Economic Forum's 'Annual Meeting of the New Champions' in Tianjin, China, Tuesday, Sept. 11, 2012.

(Andy Wong/Associated Press)

Latest China corruption twist not reflected in stocks Add to ...

The New York Times’ article detailing the extraordinary wealth accumulated by the family of China’s prime minister, Wen Jiabao, is causing big waves internationally – but you wouldn’t know it from the stock market.

The Times said that Mr. Wen’s relatives have controlled assets worth at least $2.7-billion (U.S.), and have gone through some effort to keep the public from knowing about their wealth. China has responded to the article by blocking access to the online New York Times within the country.

More Related to this Story

Whether or not the blocking efforts work, the article exposes a big problem in China: Perceived corruption among officials. And that plays into the market for luxury items – which has been a huge source of growth for international makers of luxury items.

If wealthy Chinese consumers start to equate luxury items with corruption, the market for high-end handbags and watches could dry up.

The strange thing is that luxury stocks were up on Friday morning, suggesting that investors don’t see this latest twist in Chinese corruption as a threat to growth. LVMH rose 1.6 per cent, while Financiere Richemont SA and Burberry Group PLC rose 1.7 per cent each.

In New York, Coach Inc. rose in early trading but declined as the broader market turned south in mid-morning trading. It was last spotted down 0.5 per cent. Tiffany & Co. also rose initially but was down 0.8 per cent in mid-morning trading.

Some of these luxury names have been struggling recently, with reports that Chinese sales are stumbling. But the Times’ article takes corruption allegations to a whole new level, and you have to wonder when – and how badly – luxury stocks will react.

Follow on Twitter: @dberman_ROB

For Globe Unlimited Subscribers

Business videos »

Most popular videos »

Highlights

Most Popular Stories