The market is overly optimistic about China’s economic recovery and its impact on demand for Japanese cosmetics, according to the top analyst covering the sector.
"China’s consumption sentiment is still weak, income is going to savings,” Wakako Sato, an analyst at Mitsubishi UFJ Morgan Stanley Securities, said in an interview. "Even when more tourists travel to Japan, they will likely be spending more on activities than on cosmetics products.”
This view is the key reason why Sato — one of few female Japanese analysts to earn a top ranking in their sector from Institutional Investor — is bearish on the nation’s largest cosmetics maker Shiseido. She holds the only sell-equivalent rating among 16 analysts covering the stock.