Chinese sales buoy shares for Swatch Group

Swatch Group AG, the world's largest watchmaker, jumped in Swiss trading after the company's Chinese retail partner, Xinyu Hengdeli Holdings Ltd, said growth in the world's most populous country is surging.

Second-half sales will increase by a "double-digit" percentage compared with the first six months, Hengdeli Chairman Zhang Yuping said recently.

Swatch Group, whose brands include Omega, owns an 8.1 percent stake in Hengdeli, China's biggest watch retailer.

Kepler Equities recently rated Swatch shares a "trading buy", citing Zhang's comments. Shares of Swatch rose as much as 8 percent and were up 18 Swiss francs ($17.60) to 265 francs ($259) on Oct 15 in Zurich soon after Zhang's comments.

That's the stock's biggest gain in two months, and it's on track to close at its highest in a year.

Zhang said Hengdeli's revenues from last month's Golden Week holiday on the Chinese mainland were 50 percent higher than last year, helped by demand for the Omega brand, and that demand is improving in the Hong Kong Special Administrative Region and Taiwan province.

LVMH Moet Hennessy Louis Vuitton SA, the world's biggest luxury goods company, owns almost 7 percent of Hengdeli through subsidiaries. Shares of LVMH rose 1.20 euros, or 1.7 percent, to 73.90 euros in Paris on Oct 15.

Shares of Cie Financiere Richemont SA, the world's biggest jeweler and Swatch's nearest competitor in watches, jumped 1.18 francs ($1.15), or 4 percent, to 30.66 francs ($29.99). Hengdeli also distributes Richemont's IWC and Jaeger-LeCoultre.

Zhang also said he expects Chinese demand for watches to increase over the next three years because of the government's economic stimulus program. Zhang said that Hengdeli is expanding its sales network to small- and medium-sized cities across the country to meet the swelling demand.

Hengdeli's stock has more than tripled this year. Shares jumped 4.6 percent to close at HK$2.72 in Hong Kong trading in mid-October.

Following a planned Taiwanese acquisition, Hengdeli will have about 250 combined outlets on the mainland and in Taiwan and Hong Kong by year-end, 19 percent more than it did last year.

Bloomberg

(China Daily 11/16/2009 page4)