Chinese Investors - ROLEX Over Property - Begin Focus and Preference to Swiss Luxary

[Gab27]

Originally Posted by superpop

The fallacy behind these "throw the watches in a bag and run" scenarios is that if things get that bad in China, or the US for that matter, these watches will be worth a fraction of what they think they are worth. Mass produced fashion baubles are not a safe place to store money, you would be better off sticking the money in an FDIC insured savings account.

Particularly in an area where there may be more restrictions on everyday life, one potential advantage could be less of a 'paper trail' than other more traditional means, while still having an asset with a reasonable level of liquidity?

[joli160]

[QUOTE=malba2366;11900082]

Originally Posted by Reign

People in China have made their wealth in somewhat dodgy ways

You mean good entrepreneurship and labour ethics.

[Jack T]

Originally Posted by Kevin of Larchmont

Well, diversification being an important part of any portfolio makes a strong argument for having a few watches that you can throw into a bag if you need to.

Yes, diversification is important, but I do not consider luxury watches an asset class.

[Kevin of Larchmont]

Originally Posted by Jack T

Yes, diversification is important, but I do not consider luxury watches an asset class.

Me neither but it’s an alternate, not to mention fun, store of value.

[Robf52]

Originally Posted by Kevin of Larchmont

Well, diversification being an important part of any portfolio makes a strong argument for having a few watches that you can throw into a bag if you need to.

Agree. A diversification of assets play; portable and liquid.

[GoingPlaces]

[QUOTE=joli160;11900394]

Originally Posted by malba2366

You mean good entrepreneurship and labour ethics.

Only the highest of labor ethics;)


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[Lewi777]

Can someone explain to me how the Chinese buyers have pushed up European/US prices?

I assume it is (a) more Rolex supply is directed to China, reducing EU/US supply therefore pushing grey prices up as EU/US buyers are forced to go grey or (b) Chinese buyers are buying grey from around the world, pushing up global grey prices, which is causing more flipping and dodgy AD to grey selling in US/EU, reducing EU/US supply and therefore increasing prices?

Or perhaps a bit of both, you can replace EU/US with non-China btw.

I'm genuinely curious, are Rolex stores in China full of stock or empty shelves like over here? Are Rolex squeezing non-China markets to satisfy Chinese demand?

[thenewrick]

Yes, increased Chinese demand is driving up used market prices because there's less supply.

There were production and distribution numbers produced on the forum. Rolex makes about 1.1 mil watches a year increasing by about 50k per year and China has grown to around 40% of global Rolex demand and increasing. So more is going to China and less to rest of world proportionally even with increased production

[Lewi777]

Plus I forgot (c) Chinese get on a plane to Geneva or whatever and buy all the stock!

[Lewi777]

Originally Posted by thenewrick

So more is going to China and less to rest of world proportionally even with increased production

So presumably non-China ADs are losing sales they would have made previously? Or increased local demand post-Covid (saved money as no holidays, commmute etc.) has tipped the balance from enough stock to not enough stock at a purely local level outside China?

[VogelPhoenix]

Originally Posted by Lewi777

I'm genuinely curious, are Rolex stores in China full of stock or empty shelves like over here? Are Rolex squeezing non-China markets to satisfy Chinese demand?

I haven't visited China in a couple of years (for obvious reasons), but last time I was in Shanghai the experience mirrored that of any other Rolex AD elsewhere in the world (i.e. two-tone DJs yeah, but no sports models). I'm sure availability has taken the same downward turn since then as everywhere else. Rolex is carefully spreading the misery around.

[VogelPhoenix]

Originally Posted by Lewi777

Plus I forgot (c) Chinese get on a plane to Geneva or whatever and buy all the stock!

Spending two+ weeks in a quarantine facility upon return, just to marvel at empty display cases in Geneva doesn't seem like a great payoff. The Geneva stores stopped selling SS models to non-locals years ago, and presumably have tightened up further since.

[garyk]

No offense to anyone but some of the statements in this thread are so nuts....

[Lewi777]

Originally Posted by VogelPhoenix

Spending two+ weeks in a quarantine facility upon return, just to marvel at empty display cases in Geneva doesn't seem like a great payoff. The Geneva stores stopped selling SS models to non-locals years ago, and presumably have tightened up further since.

Yeah, that's pre-Covid obvs.

[Lewi777]

Originally Posted by garyk

No offense to anyone but some of the statements in this thread are so nuts....

I'm just trying to understand where the market mania has come from. I'm told it started pre-Covid (but got worse since Covid), I'm told it is due to Chinese demand, I'm just after a simple explanation. How exactly does the Chinese demand result in empty Rolex shops in the UK?

[thenewrick]

AD's are sold out worldwide.

Chinese buyers want more Rolex so their value goes up. When used prices are higher than new prices the demand becomes infinite because it's essentially free money.

Chinese buyers want "western' luxury goods and real estate. Ask a Chinese person for their opinion why they buy Rolex and not SeaGull

[garyk]

Originally Posted by Lewi777

I'm just trying to understand where the market mania has come from. I'm told it started pre-Covid (but got worse since Covid), I'm told it is due to Chinese demand, I'm just after a simple explanation. How exactly does the Chinese demand result in empty Rolex shops in the UK?

You have asked a legitimate question. I don't have an answer but in 2018 my wife and I were in Paris at the Opera shops and saw long lines of young people possibly from Asia buying various luxury goods. That was the very last time I saw any inventory in Rolex cases and there was very little.

[Gab27]

Originally Posted by Jack T

Yes, diversification is important, but I do not consider luxury watches an asset class.

While I agree with you, quite a few folks seem to feel that it is an asset class, and I think this has certainly played a role in making it harder to obtain the watches. These watches certainly have more liquidity than quite a few other physical luxury objects and this may have led many to treat them as cash equivalents (which they obviously are not).

[malba2366]

Just wait until there is an economic downturn in China - a real possibility next year with their real estate mess, the CCP will then force the Chinese consumer inwards to prevent massive outflows. This is a very real possibility considering the extreme real estate overbuilding in urban areas, and the huge percentage of wealth held in Chinese real estate. When this happens... Rolex cases will be full again.

[GoingPlaces]

Originally Posted by malba2366

Just wait until there is an economic downturn in China - a real possibility next year with their real estate mess, the CCP will then force the Chinese consumer inwards to prevent massive outflows. This is a very real possibility considering the extreme real estate overbuilding in urban areas, and the huge percentage of wealth held in Chinese real estate. When this happens... Rolex cases will be full again.

CCP has already started to crackdown on wealth consumption under “Common Prosperity”. Will see how it plays out but I do see a shift coming, to what degree we’ll have to wait and see.


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[dannyp]

Originally Posted by Lewi777

I'm just trying to understand where the market mania has come from. I'm told it started pre-Covid (but got worse since Covid), I'm told it is due to Chinese demand, I'm just after a simple explanation. How exactly does the Chinese demand result in empty Rolex shops in the UK?

Read the C.D. Peacock lawsuit: sounds like a lot of the watches were being sent overseas on the secondary market. That suggests that in a globalized economy it doesn't matter what market Rolex allocated the watches to, they'll end up where the demand is.

[SDGT3]

Originally Posted by malba2366

Just wait until there is an economic downturn in China - a real possibility next year with their real estate mess, the CCP will then force the Chinese consumer inwards to prevent massive outflows. This is a very real possibility considering the extreme real estate overbuilding in urban areas, and the huge percentage of wealth held in Chinese real estate. When this happens... Rolex cases will be full again.

Any hard line crack down will only accelerate the flow of funds out of China but in a more covert way.

[bosch88]

Originally Posted by Reign

Not new but makes sense. They want mobile assets ie you can pack it up in a suitcase and easily move it around the world, not too dissimilar to art.

Real estate is nice but not liquid and impossible to pack up and transport.

People in China have made their wealth in somewhat dodgy ways or don’t want their government overreaching on their assets so this is just another way to park cash abroad without having to move money through the banking system. Chinese nationals can’t move that much in cash aboard each year (there are ways around it) so it’s easier to buy watches within the country, wear it abroad and then decide whether you want to ride the watch wave or liquidate it into cash.

In all cases, it’s cheap and easy way to move cash abroad and out of the reach of their government


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"People in China have made their wealth in somewhat dodgy ways " - this is a pretty offensive and general comment.... and other people in other countries don't?

[S``]

Originally Posted by GoingPlaces

CCP has already started to crackdown on wealth consumption under “Common Prosperity”. Will see how it plays out but I do see a shift coming, to what degree we’ll have to wait and see.


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Common prosperity to increase middle income wealth aka income distribution. If this works, there will be a rising tide that lifts consumption in an income segment with the largest population %.

[S``]

Originally Posted by SDGT3

Any hard line crack down will only accelerate the flow of funds out of China but in a more covert way.

Those that needs funds to move out already have their heir/heiress outside of China. Ex. Vancouver in the last 10 years, SF, LA, NYC etc etc... Anyone waiting for "today" would not be anyone of significance to the Chinese biz society

[rambo99]

Originally Posted by Reign

Not new but makes sense. They want mobile assets ie you can pack it up in a suitcase and easily move it around the world, not too dissimilar to art.

Real estate is nice but not liquid and impossible to pack up and transport.

People in China have made their wealth in somewhat dodgy ways or don’t want their government overreaching on their assets so this is just another way to park cash abroad without having to move money through the banking system. Chinese nationals can’t move that much in cash aboard each year (there are ways around it) so it’s easier to buy watches within the country, wear it abroad and then decide whether you want to ride the watch wave or liquidate it into cash.

In all cases, it’s cheap and easy way to move cash abroad and out of the reach of their government


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why not buy diamonds instead of watches? much easier to carry and they wont scratch and depreciate in value like watches, should be the most effective way to move wealth abroad.

[S``]

Originally Posted by rambo99

why not buy diamonds instead of watches? much easier to carry and they wont scratch and depreciate in value like watches, should be the most effective way to move wealth abroad.

Check out the crazy rich Asian of Vancouver. No, the money did move via watches. It moved with the heirs/heiress via properties, "education" expenses, green card for the extended family members

[gerry100]

Originally Posted by dannyp

I think it’s also become a trend in China to invest in difficult-to-seize assets. Foreign real estate. Now watches. Things either parked overseas or easily put in a suitcase. Watches work very well for this purpose.

Agree, I sold a house in Massachusetts to Chinese investors 5 years ago.

I think the Chinese govt cracked down on "flight capital" since which could have driven more wealth into watches etc

[GoingPlaces]

Originally Posted by rambo99

why not buy diamonds instead of watches? much easier to carry and they wont scratch and depreciate in value like watches, should be the most effective way to move wealth abroad.

They do that too. As others posted, it's diversification. 30 plus Tiffany's in China.

[mquarter]

That's brave. What if the luxury sector is next for the 'common prosperity' drive?