Impossibly beautiful women in banana skin print dresses and finely chiselled men in bright coloured jackets sashayed and strutted down the mirrored catwalk. Miami Vice and Farewell My Concubine star Gong Li looked on under a mop of curly dark hair and above a plunging neckline.
Miuccia Prada's decision to send her models down this catwalk in Beijing in January was a big statement of intent: it was the first time that her Italian fashion house's mainline collection was shown outside its homeland and the reason was commercial. Prada is planning a ¤1.6bn (£1.4bn) flotation in Hong Kong this summer.
Usually one to start rather than follow trends, Prada is in fact following French upmarket fragrance company L'Occitane en Provence which listed in Hong Kong last May. Jimmy Choo, the private equity-owned women's shoemaker, could be next, with reports on Thursday suggesting that a listing off the coast of China could value the company at £650m.
The Hong Kong stock exchange is becoming the place to be for Western consumer and luxury goods companies. They are looking to tap into the vast wealth of the fast-growing South-east Asian markets and the dedicated followers of fashion who have emerged.
Most importantly, the high demand for flashy fashion and expensive brands means that luxury groups should get top dollar for their shares in Hong Kong. This should be particularly true for the next few years, as names such as Prada and L'Occitane will stand out among the listed firms.
Kate Calvert, a retail analyst at Seymour Pierce, says: "The reason these luxury goods companies are looking at Hong Kong is that they hope to get a higher price and valuation than in Europe. Scarcity value will help Prada as few global brands are listed in Hong Kong and aspirational brands are adored by the Asian market."
The share pricings reflect that these are European luxury brands. Calvert says that similar Asian luxury goods groups in Hong Kong achieve prices comparable to those European brands get in, say, Milan or London's exchanges. Domestic players do not have star quality in their own territories, so while L'Occitane shares have soared 30 per cent in Hong Kong, it's unlikely they would have done so well in Paris.
Hong Kong and China's luxury goods craze started booming about 15 years ago as they grew as financial and industrial powerhouses and the middle classes blossomed. Soon, the Chinese will be the best-dressed, best-accessorised people in Asia.
Mark Henderson, deputy chairman of Savile Row tailor Gieves & Hawkes, has seen the growth first hand. A Hong Kong-based investor first invested in Gieves & Hawkes in 1990, Henderson says: "There is colossal growth potential in China. Japan is by far the largest luxury goods market but China is biting at its heels. We have two or three shops or concessions in every major city and this is the way for most European luxury goods brands. Given the financial strength of Hong Kong it doesn't surprise me that people are choosing to list there."
This is just the beginning, Henderson argues, as per capita earnings are nowhere near the level of Japan. "I have no hesitation it [Chinese demand for luxury goods] will grow for the next 20 years." All this potential and the Shanghai Stock Exchange is still not fully open to overseas firms and investors. Limited changes to the protectionist rules started in 2008 and canny consumer goods groups spy a major opportunity for lucrative listings in mainland China.
Chris Swift, a partner at lawyer Allen & Overy, says: "Some companies take the view that when access is opened up to mainland China, those companies listed in Hong Kong will have an advantage and may get preferential treatment. The ability to move up to China is some way off and there is no timescale, but it is a strategic gamble. And quite a number think it is worth taking. But the immediate draw for brands to list is that they have always proved a hit in Hong Kong."
However, there are risks and luxury brands would do well to look at other industries that have had problems trying to crack China. For example, earlier this year toy-maker Mattel closed its six-storey Barbie toy store in Shanghai amid tough competition and poor sales, while US electrical retailer BestBuy shut all its branded shops in the country.
Guy Salter, deputy chairman at British luxury brands trade body Walpole, says: "Expanding into China is difficult and many have got it wrong – look at Mattel. Local Chinese companies launch look-a-like brands to undercut the established original European version. This happened with Barbie here."
Salter also believes that the Chinese economy is in danger of becoming overheated. "Inflation, the property bubble, the expansion of home grown brands could all affect how companies perform there."
Some luxury groups are heeding these warnings. Salvatore Ferragamo, Italian shoemaker to Hollywood greats, is plumping for Milan over Hong Kong for its long awaited ¤1.5bn flotation. Ferragamo is believed to have considered Hong Kong. It had to: the Chinese took over from Americans as the number one shopper of Ferragamo products last year. This meant that the group still needed to beef up its ties to the region. So the Florence-based company sold an 8 per cent stake to Hong Kong property entrepreneur Peter Woo and his family, who have helped to distribute the brand in China, Taiwan and Macau for two decades.
So, if luxury groups aren't floating, they are finding other ways of taking on China. This year Polo Ralph Lauren said it is committed to increasing its number of stores in Beijing and Shanghai and also plans to enter China's "second tier" cities.
Its chief executive Roger Farah told investors: "In the China territories, we are beginning to see improvement in our sales velocity as we become more astute with our planning and tiering of merchandise, especially as customers are exposed to our more premium labels and products." Last month, Burberry launched its all-singing, all-dancing Beijing flagship store, with its huge LED screens and the brand's biggest childrenswear section.
Opening shops, though, is far less of a commitment to China than listing company shares there. If L'Occitane's success continues and Prada shares are snapped up by starstruck investors, other luxury goods brands are sure to consider moving to the Hong Kong Stock Exchange.Reuse content