Increasing wealth in emerging markets favours European luxury consumer stocks

Dynamic European Equity manager has a strong preference for older, larger companies with proven sustainability.

Diana Cawfield 4 October, 2018 | 5:00PM

Consumer discretionary stocks remain a favoured theme for Benjamin Zhan, lead manager of Dynamic European Equity, which allocates a 35% weighting to the sector, compared with 9% for the MSCI Europe Index. Zhan, who has managed the Morningstar 5-star rated fund since 2009, is a portfolio manager with 1832 Asset Management in Toronto, which manages the Dynamic family of funds.

"I think one of the strongest secular forces in the world today," says Zhan, "is emerging market consumers. Europe is the only home for the world's most prestigious consumer brands in luxury goods. I call Europe a match made in heaven for emerging market consumers." Zhan's enthusiasm is based on his fundamentally-based investment approach to identify sector growth industries, seeking the strongest players and waiting to buy them at a discount.

In the past, Zhan says that luxury goods were mostly about consumers in Europe and the United States, but these two regions together only represented 10% of the global population. "Recent studies," says Zhan, "show that Chinese consumers alone spend 87 billion euros a year in luxury goods, and that can more than triple to more than 280 billion euros by 2030. The entire Swiss watch-making industry generates 18 billion euros in sales per year, so a potential 280-billion-euro increase is significant." And those numbers do not even include consumers from Brazil, India and Mexico, adds Zhan.

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About Author

Diana Cawfield

Diana Cawfield  Diana Cawfield is an award-winning writer who has been a regular Morningstar contributor since 2000. Her numerous publication credits include the Toronto StarAdvisor's Edge and Chatelaine, as well as the Canadian Securities Institute's online educational services.

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