Swiss watch exports fell in September for the first time in almost three years as demand from consumers in Asia dropped sharply, raising questions about the immediate prospects of Europe's luxury goods companies.
The voracious appetite of Asia's nouveau riche for upmarket goods has been an important factor behind the strong performance of luxury goods companies in general and Swiss watchmakers in particular, over the past 18 months.
However, that wave of demand may be ebbing. At SFr1.73 billion, the total value of Swiss watch exports in September was 2.7 percent lower than in the same month a year earlier. The biggest decline came in China, where sales dropped 27.5 percent, while in Hong Kong – the biggest foreign market for Swiss watches – sales were down 19.9 percent. Taiwan and Singapore posted similar declines.
The news sent shares in Swatch, which derived more than half its record revenues in 2011 from Asia, down 2.5 percent on Thursday, while shares in Richemont, the Swiss luxury group which owns brands such as Cartier, Vacheron Constantin and Piaget, lost 3.5 percent.
The Federation of the Swiss Watch Industry, which produced the figures, said that given the long run of export growth there was no "cause for concern", but conceded that the Asian market was "clearly losing its momentum".
Thomas Chauvet, an analyst at Citigroup, said that the fall marked a turning point in the market cycle, suggesting that Swiss watch exports were now likely to remain negative "for a few consecutive months."
This was due to "excess inventories in Asia, legitimate concerns of a broad-based slowdown in consumer spending in China, economic pressures in Europe, [and] negative wealth effects around the globe [such as] property [and] commodities".
"The question remains how long will the destocking last," he added, noting that in the 2008-09 recession the process took 14 months, while it took 19 months during the downturn between 2001 and 2003.
However, Jon Cox, head of Swiss research at Kepler Capital Markets, said that although China was clearly slowing, the figures also suggested that some Asian activity was being displaced to Europe.
Exports of Swiss watches to Germany jumped 31.2 percent, while Italian sales were up 23.7 percent, and Spanish sales rose 18 percent.
Meanwhile, there was also a sharp contrast between the fortunes of very expensive, and merely expensive watches, with foreign sales of watches costing over SFr3,000 rising 3.7 percent, while exports of watches below this price fell 10.8 percent.
"There is a bit of a disconnect between very rich Chinese, who are still coming to Europe to buy luxury goods, and the more aspiring classes, who are not buying as much at the moment in Greater China," Mr Cox said, adding that he expected demand to recover once the uncertainty surrounding the Chinese leadership handover had passed.