What's going on?
News emerged this week that Hermès is set to join the Euro Stoxx 50, and the luxury company could certainly get used to the sweet smell of success.
What does this mean?
Hermès – which is already listed on the French stock market – has had a dynamite year: demand for the company’s nice-to-haves has gone through the roof thanks to customers with places to go, people to see, and savings to spend. That’s in turn gone down well with investors, who have sent its share price up 90% this year.
Cue the Euro Stoxx 50: the index – which is made up of the 50 biggest listed companies by value in the eurozone – is regularly updated to replace stocks whose values have fallen with those whose have risen. And since Hermès has proved its worth, it’ll finally claim a spot in the esteemed index for itself at the end of the month.
Why should I care?
The bigger picture: Luxury’s going digital.
If Hermès is looking for another way to lift its share price, might we suggest it leans into NFTs. The luxury industry has been fashionably late to this particular party, but the arrival of Gucci’s first NFT could be a sign that companies are finally showing up. And given that Morgan Stanley reckons NFT sales could represent up to 7% of luxury companies’ revenue by 2030 (tweet this), the prospect is bound to put a smize on their faces.
For markets: Follow the money.
The UK’s key stock index – the FTSE 100 – reshuffled its stock holdings this week too, replacing cybersecurity firm Darktrace and chemicals company Johnson Matthey with veterinary medicine producer Dechra Pharmaceuticals and electronics distributor Electrocomponents. Keen-eyed investors might’ve spotted an opportunity here: billions of dollars are invested in funds that passively track the FTSE, and those funds are forced to invest in any newly introduced stock. So if those investors bought into Dechra and Electrocomponents ahead of this week’s rebalancing, they might’ve earned a windfall once the passive funds adjusted to reflect the updated index.