Subscribe free to our newsletters via your
. 24/7 Space News .




INTERNET SPACE
Turbulent time for Swiss watchmakers in China
By Nathalie OLOF-ORS
Zurich (AFP) Aug 26, 2015


Swiss watchmakers are facing turbulent times in one of their top markets, as the already shrinking luxury sales in China are compounded by the recent devaluation of the yuan.

Global financial markets are still reeling from the Chinese central bank's sudden devaluation of the yuan earlier this month, which allowed the currency to plunge nearly five percent against the dollar in a matter of days.

In Switzerland, the move rattled the Alpine country's luxury watchmakers, who have already seen their once booming sales in China take a hit as Beijing began to crack down on corruption in the country by banning extravagant gifts like prestigious watches to public officials.

Even before the yuan move, Swiss watch exports to China had contracted nearly 40 percent in July.

When the yuan devaluation was announced on August 11, investors were clearly bracing for the worst, recalling the impact on watch sales when Switzerland's central bank in January let the Swiss franc float and sent it soaring.

Shares of Swiss luxury goods giant Richemont, which owns brands like Cartier, Piaget and IWC, immediately shed more than 4.0 percent of their value after the Chinese currency cut.

The world's biggest watch group Swatch, which carries brands like Tissot, Longines and Omega, saw its stock price plunge 3.9 percent.

- 'Positive' view -

But so far there is no indication the yuan devaluation will cause the same level of havoc for the watch industry as the move by the Swiss central bank did earlier this year, industry insiders say.

When it suddenly stopped artificially holding down the value of the Swiss franc, allowing the currency to soar 20 percent against the euro in a matter of hours, the impact on watch sales was felt immediately, Jean-Claude Biver, luxury giant LVMH's watch guru, told AFP.

"But today, we are not feeling the same effects from China's devaluation," he said, explaining that the Swiss watch industry would be able to absorb any rising costs linked to the Chinese central bank's move.

And both analysts and the watchmakers themselves have warned against overreacting, insisting the yuan devaluation will not have a big impact on sales and could even improve them.

Swatch for instance said it viewed the move as "positive" since it would likely stimulate consumption, and insisted there were no plans to hike the brand's prices in China.

While the yuan devaluation makes it more expensive to import luxury goods into China, it also pushes down costs onsite.

For a company like Swatch, which employs around 2,600 people in China, mainly in its marketing, sales and client services divisions, that could mean big savings.

- Grey market -

Still, the impact of China's devaluation is difficult to quantify, analysts say.

"If the devaluation of the yuan is limited and takes place on a controlled basis, it would be a positive for the Swiss watch industry," Kepler Cheuvreux analyst Jon Cox told AFP in an email.

"It narrows the differential between Europe and China prices, meaning more watches would be bought in China and there would be less of a grey market," he added.

Stark currency differences since the Swiss franc took flight in January had pushed Chinese consumers to purchase more of the luxury watches they covet when travelling abroad.

But they have also boosted a "grey market", where watches are bought in one market and quickly sold in another at more advantageous rates.

In response, some brands had opted to lower their prices in China before the yuan devaluation in a bid to rein in such parallel markets.

This can prove painful now, since they do not want to be seen raising their prices again so soon to compensate for the dwindling value of the yuan, said Luca Solca, an analyst with Exane BNP Paribas.

To protect their reputations, these watchmakers will opt to stick to low yuan prices, allowing their high Swiss franc costs to eat into profits, and they "will suffer," he told AFP in an email, suggesting though that those who had not already lowered their prices would fare better.

In a note, he also maintained that the yuan devaluation would only have a moderate impact on the bottom line of luxury goods makers.

It would take a devaluation of 20 percent or more to shrink profits in the sector by 5.0-10.0 percent, he said.

.


Related Links
Satellite-based Internet technologies






Comment on this article via your Facebook, Yahoo, AOL, Hotmail login.

Share this article via these popular social media networks
del.icio.usdel.icio.us DiggDigg RedditReddit GoogleGoogle




Memory Foam Mattress Review
Newsletters :: SpaceDaily :: SpaceWar :: TerraDaily :: Energy Daily
XML Feeds :: Space News :: Earth News :: War News :: Solar Energy News





INTERNET SPACE
Chinese smartphone market expected to cool this year: report
San Francisco (AFP) Aug 25, 2015
The once-hot smartphone market in China is expected to cool this year, growing a meager 1.2 percent, according to a report released Tuesday. The China smartphone market grew 19.7 percent last year and accounted for nearly a third of all new handsets shipped, according to the International Data Corporation's Worldwide Quarterly Mobile Phone Tracker report. "China clearly remains a very im ... read more


INTERNET SPACE
Russia Gets Ready for New Moon Landing

ASU chosen to lead lunar CubeSat mission

Russia's moon landing plan hindered by financial distress

Research May Solve Lunar Fire Fountain Mystery

INTERNET SPACE
One year and counting: Mars isolation experiment begins

HI-SEAS launches year-long isolation experiment to mimic life on Mars

Nine Real NASA Technologies in 'The Martian'

Opportunity gives clay-mineral rocks get closer inspection

INTERNET SPACE
Chinese tourists unfazed by currency fall, market turmoil

French woman wins disability grant for 'gadget allergy'

Don't make us hitch rides with Russia: NASA chief

Middle School Students Write Code for Space Station

INTERNET SPACE
China's "sky eyes" help protect world heritage Angkor Wat

China's space exploration potential has US chasing its own tail

China to deploy space-air-ground sensors for environment protection

Chinese earth station is for exclusively scientific and civilian purposes

INTERNET SPACE
ISS Crew Redocks Soyuz Spacecraft

CALET docks on the International Space Station

Astronaut Andreas to try sub-millimetre precision task on Earth from orbit

Japan's cargo craft delivers supplies, whiskey to space station

INTERNET SPACE
Preparations with both passengers ongoing at Kourou

Countdown for Indian rocket GSLV launch to begin on August 26

Galileo satellites are "topped off" for Arianespace's upcoming Soyuz launch

ARSAT-2 arrives in French Guiana

INTERNET SPACE
A new model of gas giant planet formation

Planetary pebbles were building blocks for the largest planets

Solar System formation don't mean a thing without that spin

Gemini-discovered world is most like Jupiter

INTERNET SPACE
Using ultrathin sheets to discover new class of wrapped shapes

Smallest 3-D Camera Offers Brain Surgery Innovation

Scientists from NTU Singapore find electrifying solution to sticky problem

Combined disciplines, computational programs determine atomic structure




The content herein, unless otherwise known to be public domain, are Copyright 1995-2014 - Space Media Network. All websites are published in Australia and are solely subject to Australian law and governed by Fair Use principals for news reporting and research purposes. AFP, UPI and IANS news wire stories are copyright Agence France-Presse, United Press International and Indo-Asia News Service. ESA news reports are copyright European Space Agency. All NASA sourced material is public domain. Additional copyrights may apply in whole or part to other bona fide parties. Advertising does not imply endorsement, agreement or approval of any opinions, statements or information provided by Space Media Network on any Web page published or hosted by Space Media Network. Privacy Statement All images and articles appearing on Space Media Network have been edited or digitally altered in some way. Any requests to remove copyright material will be acted upon in a timely and appropriate manner. Any attempt to extort money from Space Media Network will be ignored and reported to Australian Law Enforcement Agencies as a potential case of financial fraud involving the use of a telephonic carriage device or postal service.