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Swatch’s Hayek Sees China Market Expanding About 10% in 2013

Swatch Group AG (UHR), the biggest maker of Swiss timepieces, forecast growth in mainland China’s watch market this year amid increasing concern that a slowdown in the Asian country may cloud the outlook for luxury-goods makers.

The market will expand by about 10 percent in 2013, Chief Executive Officer Nick Hayek said yesterday by telephone, adding that growth may be more or less than his forecast.

“We see very good business in the mid-range and entry- level” with brands such as Longines and Tissot, Hayek said. “In the high-end, they might have a little bit less sales, but you can’t grow every year by 50 or 60 percent.”

Hayek’s forecast comes after growth in exports of Swiss timepieces to China slowed to 4.4 percent in the first 11 months of 2012. Shipments to the country rose 49 percent in 2011, according to the Federation of the Swiss Watch Industry.

Cie. Financiere Richemont SA (CFR), the world’s second-biggest luxury-goods company, said Jan. 21 that sales in the Asia- Pacific region stalled during the three months through December. Decelerating growth in China is a concern for luxury companies. Chinese buyers account for 25 percent of global luxury spending, according to a September HSBC Global Research report.

Hayek said he sees “no reason” for the Swiss watch industry not to have “healthy growth” this year. Swatch said Jan. 10 that gross revenue climbed 14 percent in 2012 and that the first days of January indicated “positive growth.”

‘Somewhat Conservative’

“Given the 20 percent to 30 percent growth over last few years for Hong Kong and China combined, Hayek’s forecast might be seen as somewhat conservative and take the market by surprise,” said Jon Cox, head of Swiss research at Kepler Capital Markets in Zurich. He estimates that the Chinese watch market will expand 10 percent in 2013.

Swatch shares fell 1.9 percent to close at 492 francs in Zurich trading yesterday, and Richemont dropped 1.6 percent to 75.20 francs.

“Richemont is the world’s biggest maker of luxury Swiss watches, so a slowdown in the high end would impact it more than someone like Swatch, which has a broader portfolio,” Cox said.

Biel, Switzerland-based Swatch’s collaboration with Chinese retailer Hengdeli Holdings Ltd. (3389) hasn’t changed, Hayek also said.

Hengdeli shares fell the most in more than three years in Hong Kong trading yesterday after Next Magazine said the company lost an exclusive distribution license to sell some brands. The stock fell 13 percent, the most since June 2009.

“Swatch Group is a big shareholder and we’re very happy,” Hayek said. “The development is very good -- there is no irritation in our collaboration.”

Hengdeli, in a statement to Hong Kong’s stock exchange yesterday, didn’t comment directly on the Next Magazine report, saying only that operations are “normal, healthy and stable,” and that “the company has maintained good partnerships with numerous worldwide renowned watch suppliers.”

To contact the reporters on this story: Dermot Doherty in Geneva at ddoherty9@bloomberg.net

To contact the editor responsible for this story: Celeste Perri at cperri@bloomberg.net

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