Swiss Watchmakers' Happiness Depends on G20

With only 93 days left until Christmas, Swiss watchmakers like Richemont and Swatch are now hoping that improved consumer confidence and a brighter economic outlook in many of the companies’ main export markets will give a boost to Christmas luxury sales.

Sharon Lorimer

Swiss watch export figures do give reason to be more cheerful though: exports to China rose 20 percent in August while those to Singapore unexpectedly jumped 9 percent.

But companies’ source of stronger Christmas sales is also subject to a much more subtle criterion than just economic growth in China: for sales to be rekindled in weak markets such as the US and parts of Europe, the G20 may have a bigger influence than many would assume.

Fact is, men traditionally spend twice as much on women’s holiday presents than the other way around.

But with bankers’ bonuses under scrutiny by the G20, the bankers of this world – formerly known as the big spenders - may continue to substitute their spouses' extravagant diamond rings for a more wallet-friendly alternative for a longer period of time if bonuses will be capped indefinitely.

So, dear G20, please do not take away the women’s joy of finding a Cartier watch under this year’s Christmas tree.

However, there is a chance to have some glamor in one’s portfolio, if not on one's wrist: how about investing in one of the luxury goods funds or individual firms?

With strong balance sheets and cost-cutting programs under way, many luxury firms have outperformed the rest of the market substantially.

And if emerging markets continue to show strong demand for luxury watches coupled with resurging demand for pricier items from the developed world, the rally seen in Swiss watchmakers’ shares will likely go on.

Richemont was up 44.58 percent this year, while Swatch was up 67.91 percent, both being among the biggest gainers on the SMI and outperforming DJ personal and household good index.

While Swatch, the maker of Omega and Breguet brands, has been notoriously bullish about the second half of the year, the outlook given by Richemont, whose Cartier brand is driving the company’s sales, struck a more subdued tone.

Richemont had little clarity about the economic outlook, making it difficult to indicate sales for the second half of the year.