LVMH Group Watches & Jewellery Division Asia Pacific, an arm of the world's largest luxury products group Moet Hennessy Louis Vuitton, yesterday announced it had purchased close to 50 million shares in Xinyu Hengdeli Holdings via the secondary market.

LVMH now owns an almost 3 per cent stake in watch retailer and wholesaler Xinyu Hengdeli and said it would continue to increase its shareholding.

"We aim to purchase a total of 7 per cent in Xinyu Hengdeli in the first phase in order to gain a position on the Chinese company's board of directors," said James Cheng, general manager of LVMH Group Watch & Jewellery Division in China.

Cheng said Xinyu Hengdeli is currently the strongest retail agent for mid- to high-end watches in China, with extensive experience in the field and an advanced management system.

LVMH Group signed a deal in 2004 with the local distributor, because it is China's sole agent for Tag Heuer, Zenith, Fendi and Dior watches, Cheng said.

Earlier in May, the French company said it would begin acquiring Xinyu Hengdeli through the secondary market; on the first day it spent HK$20 million (US$2.57 million) buying 6 million shares.

LVMH Group said the collaboration would boost sales of Zenith, Tag Heuer, Fendi and Dior watches.

The group will also pay attention to the capital market using its ample funds to strengthen co-operation with Xinyu Hengdeli and help the luxury group increase its share in China's luxury watch market.

Cheng said Tag Heuer, the world's fourth-largest luxury watch brand, has huge potential in China. "I believe Tag Heuer will soon gain as important a position in China as it has elsewhere in the world," he said.

LVMH's watch and jewellery business currently sees a three-fold increase in China each year, but Cheng admitted the firm's revenue still does not compare to its major competitors. "We are still new in the market, so the base is very small," he said.
LVMH's watch and jewellery division entered China in 2001.

Now the company considers the China market to be a key focus for development.

It said it is positive about the future of Xinyu Hengdeli and will not limit collaboration to China's watch and jewellery field, but potentially branch out to other luxury products.

Xinyu Hengdeli has a long history of distributing watches and clocks, with 76 retail stores across the country and plans to open 25 new stores this year.

On the back of China's strong economic growth LVMH predicts the growth rate in the number of millionaires in China is as high as 12 per cent, compared to a worldwide increase of only 7.5 per cent.

The company said that this growth would create increasing demand for luxury products.

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