April 27, 2017 / 9:18 AM / 3 months ago

Hong Kong helps Swiss watch exports break 20-month slump in March

ZURICH, April 27 (Reuters) - Switzerland's watch industry exports rose in March for the first time since June 2015 as the Hong Kong market ended 25 months of declines.

Swiss watch exports rose 7.5 percent in nominal terms to 1.6 billion Swiss francs ($1.61 billion), Swiss customs data showed on Thursday.

"March exports are pointing definitely in the right direction after weakness in January and February," Zuercher Kantonalbank analyst Patrik Schwendimann said in a note.

The results were helped by two additional trading days as well as a particularly weak comparison in the prior-year month.

Watchmakers such as Swatch and Richemont have been suffering ever since China's government took measures to crack down on gifts for favours about four years ago. Political protests in Hong Kong in 2014 worsened the problem.

The reversal, which wrong-footed watchmakers and retailers, has been exacerbated by weaker demand in tourism hot spots in Europe and high costs triggered by a strong Swiss franc.

But in March, exports to Hong Kong, where mainland Chinese used to buy luxury goods due to lower taxes, reversed double-digit falls, increasing 18.1 percent over the year before, the Federation of the Swiss Watch Industry said.

The mid-price segment -- an important part of Swatch Group's business -- saw the greatest improvement across all markets. Timepieces exported for between 200 and 500 francs, which retail at a somewhat higher price point, grew more than 20 percent.

"We continue to expect that Swatch Group will find its way back into revenue growth in 2017, thanks among other things to the important Chinese market," Schwendimann said, maintaining its "overweight" rating on the stock.

UBS had upgraded Swatch to "buy" on Wednesday.

Even as trade was rising, watchmakers told Reuters at an industry fair in March they expect the market to stay challenging this year.

"It is going to be a patchy recovery -– sell out trends are improving but there is still plenty of stock in the channels," Kepler Cheuvreux analyst Jon Cox said on Thursday.

Vontobel analyst Rene Weber said he expected lower growth in April and May than seen in March.

"But positive growth should now continue to reach our expectation for plus-1 percent for 2017," he said.

$1 = 0.9932 Swiss francs Reporting by Brenna Hughes Neghaiwi and Ruppert Pretterklieber

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