A creation by Indian designer Prashant Verma Photo : Manpreet Romana/AFP

HONG KONG, March 13, 2008 (AFP) - Luxury brand Chanel's choice of a Hong Kong carpark roof to launch a global-trotting art exhibition raised some eyebrows, but the location reflected Asia's growing importance to the fashion world.

Chanel's flamboyant pony-tailed designer Karl Lagerfeld described the venue, besides the city's famous Victoria Harbour, as stunning.

"Hong Kong is most beautiful at night," he said at Wednesday's launch of the Mobile Art Museum, a moveable structure by architect Zaha Hadid that exhibits work by 20 artists based on Chanel's quilted handbags.

Vincent Shaw, Chanel's president for Asia Pacific, said Hong Kong was carefully chosen as the best place to launch the exhibition before it tours other fashion capitals around the world, including London and New York.

"Asia has a huge population and an incredible liquidity. We believe that there's huge opportunity and Asia is going to be very successful," Shaw said.

Asian consumers account for more than 50 percent of the annual 80 billion dollar sector, more than the US and Europe combined, according to Radha Chadha co-author of the book "The Cult of the Luxury Brand."

"The reason why Asians buy so many luxury brands is that in Asia you are what you wear. A luxury brand is a symbol that defines who you are and your social status," Chadha told AFP.

"People judge each other by what brand of handbag they are carrying."

With Asia being the world's biggest market for Western luxury goods, international brands are shifting focus from Paris, New York and London to the fast-growing emerging markets in the region.

Major designer brands, including Christian Dior and Gucci, spent more than 60 million dollars on advertising in Hong Kong last year, 23 percent more than in 2006, according to a study by market researcher Nielsen.

This Friday, Hong Kong will see Louis Vuitton step up the battle for a bigger slice of the Asian market with the re-opening of its massive store after a year of renovation -- more than double the size of its old shop.

The store, across the harbour from Chanel's mobile art gallery, is Louis Vuitton's second-largest after its flagship building on the Champs Elysees in Paris.

Jean-Baptiste Debains, Louis Vuitton's president for Asia Pacific, said the company has recorded double-digit annual growth in Hong Kong.

"The Hong Kong market is quite mature but is still growing. We have strong potential with the local customers because of the growth of wealth and the economy as a whole," he said.

Chadha predicts that Hong Kong's neighbour -- mainland China, one of Louis Vuitton's fastest-growing markets -- will overtake Japan as Asia's biggest luxury market in seven years, with India set to storm ahead too.

In mainland China, Louis Vuitton has already 18 stores located in Beijing, Shanghai and in other smaller cities, with six more expected to open this year.

"There are a lot of cities in China where we can have stores, maybe not today, maybe in three years," Debains said.

But it is not all about China. Vietnam has also become a focus for the company, with chief executive Yves Carcelle quoted in the Financial Times as saying revenues there grew more than 300 percent last year.

Louis Vuitton will also open stores this year in Indonesia, South Korea and Taiwan.

Coach, the US maker of handbags and accessories, said it aims to grow its Chinese operation by more than 60 percent over the next few years and will open a global flagship store in Hong Kong this summer.

The combination of mainland China, Hong Kong, Macau and Taiwan have the potential to become the third major market for Coach, following North America and Japan, it said.

Chadha warned the economic slowdown in the United States, with fears the world's largest economy is slipping into recession, was likely to hit luxury goods consumption.

But Louis Vuitton's Debains said growth in Asia looked unstoppable.

"I feel there's a stronger dynamism and energy in Asia. Maybe that is because we have the economic growth that creates the kind of spirit that pushes people to go forward," he said.

by Stephanie Wong