After the South Korean stock market (KOSPI) soared this year, a wealth effect is quietly reshaping the landscape of luxury goods consumption in Asia.
On February 27, according to news from the Wind Trading Platform, UBS pointed out in its latest research report that there is a clear turning point in the demand for luxury goods in South Korea—same-store sales growth in department stores is expected to accelerate to 15% in the fourth quarter of 2025, with a surge in inbound Chinese tourists and a price arbitrage window created by the depreciation of the Korean won against the Chinese yuan. Under the resonance of these three driving forces, the South Korean market is expected to become the most important marginal source of growth for the European luxury goods industry in the near future.
The report indicates that the most critical signal is: this means that European luxury goods companies with high exposure in the South Korean market, such as Hermès, LVMH, Prada, and Burberry, are likely to be the main beneficiaries. Currently, the valuation of the European luxury goods sector has fallen back to the bottom of its historical relative valuation range, and any news confirming the sustained improvement in demand could drive a revaluation of the sector.
<h2>South Korean Consumers: A Strategic Piece Not to Be Ignored in the Luxury Goods Industry</h2>
The report points out that South Korean consumers occupy a unique position in the global luxury goods landscape.
According to UBS estimates and data disclosed by various companies, the South Korean market contributes an average of mid to high single-digit percentages (MSD to HSD%) to the sales of luxury goods groups.
UBS states that more importantly, South Korean consumers are recognized in the industry as &#34;highly mature and trendsetting,&#34; and their consumption trends serve as a significant barometer for the entire Asian region.
<blockquote>
Especially in the current post-pandemic era, where luxury goods demand is weak, the South Korean market has maintained a relatively independent consumption rhythm due to not experiencing strict lockdowns during the pandemic, making it an important leading indicator for observing the direction of luxury goods demand in Asia.
</blockquote>
<h2>Three Driving Forces: Where Does the Demand Turning Point Come From?</h2>
UBS's research report outlines three core factors driving the improvement in luxury goods demand in South Korea:
First, the wealth effect from the stock market. The KOSPI has risen over 40% this year (with an estimated annual increase of about 76% for 2025), and the participation rate of local residents in the stock market is higher than the average level in the Asian region. The rise in stock prices directly boosts residents' perception of wealth, thereby stimulating their willingness to consume high-end products.
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Second, a surge in inbound Chinese tourists. South Korea has implemented a visa-free entry policy for Chinese tour groups, and due to the ongoing geopolitical tensions between China and Japan, many Chinese tourists are shifting their consumption destinations from Japan to South Korea. Data from the Korea Duty Free Association shows that the number of inbound tourists has significantly rebounded as of January 2026.
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Third, the opening of a currency arbitrage window. The continued weakening of the Korean won against the Chinese yuan has significantly enhanced the attractiveness of luxury goods prices in South Korea. **As of January 2026, luxury goods prices in South Korea are basically on par with those in Europe, whereas in January 2025, prices in South Korea were still about 13% higher than those in Europe
** The elimination of this price gap has attracted Chinese tourists to shop in South Korea and stimulated the purchasing willingness of local Korean consumers.
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<h2>Data Verification: Accelerating Department Store Sales, Clear Turning Point Signals</h2>
UBS pointed out that in terms of hard data, the same-store sales growth of South Korean department stores has shown a clear acceleration trend: the growth rate in the first three quarters (9M) was in the mid-single digits (MSD) range, while the growth rate in the fourth quarter of 2025 surged to 15%, indicating significant acceleration.
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At the same time, several luxury brands made positive comments about the South Korean market during the earnings calls for the fourth quarter of 2025, further confirming the sustainability of demand improvement.
<h2>Who are the Biggest Beneficiaries? Ranking of South Korean Exposure</h2>
According to UBS's estimates and company disclosures, the sales exposure of various luxury companies in the South Korean market in 2025 is as follows:
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<ul>
<li>Hermès, Moncler, Prada: approximately 9%</li>
<li>Burberry: approximately 8%</li>
<li>Ferragamo: approximately 7%</li>
<li>Kering, Richemont: approximately 6%</li>
<li>LVMH, Swatch: approximately 5%</li>
<li>Zegna: approximately 4%</li>
<li>Brunello Cucinelli: approximately 3%</li>
<li>Hugo Boss: approximately 2%</li>
<li>Pandora, EssilorLuxottica: approximately 1%</li>
</ul>
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Based on this data, UBS believes that Hermès (Neutral), Moncler (Buy), Prada (Neutral), and Burberry (Buy) are most likely to benefit from the recovery of demand in the South Korean market.
From a valuation perspective, the current premium of the European luxury goods sector relative to the MSCI Europe Index (excluding Hermès) is approximately 58%, which is basically 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 at the bottom of the historical relative valuation range. Once the signals of sustained improvement in the South Korean market demand are further confirmed, it is expected to become an important catalyst for triggering the sector's valuation to repair towards the top of the range.

HESAY

KLXY

UBS believes that the surge in the South Korean stock market has triggered a wealth effect, combined with a surge in Chinese tourists and the depreciation of the Korean won leading to price arbitrage. These three driving forces have prompted a significant turning point in the demand for luxury goods in South Korea. South Korea is becoming an important source of incremental growth for European luxury brands, with brands like Hermès and Moncler, which have high exposure in Korea, likely to be the biggest winners, potentially driving a revaluation of the European luxury sector that is currently at a valuation bottom

- The South Korean stock market's rise has significantly affected luxury goods consumption, particularly driven by a surge in Chinese tourists and favorable currency exchange rates.  
- UBS's report highlights that South Korea is becoming a crucial market for European luxury brands, with companies like Hermès and Prada expected to benefit the most.  
- Key factors for this demand turnaround include the wealth effect from stock market gains, increased tourist arrivals, and a favorable pricing situation resulting from currency fluctuations.

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