Feb 5, 2008
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Swiss luxury goods still sparkle thanks to Eastern promise

Feb 5, 2008

ZURICH, Feb 5, 2008 (AFP) - Switzerland's watchmakers and other luxury goods makers are set for further growth in 2008 as strong demand in Asia and the Middle East offsets economic gloom in the US and Europe.

Swatch Cyber Queen

Swatch chairman Nick Hayek struck a bullish note in a weekend interview, telling the Finanz und Wirtschaft newspaper he expects the company's sales to grow to 10 billion Swiss francs (9 billion dollars, 6 billion euros).

"The boom in the watch industry has already lasted a long time and is set to continue over the coming year," Hayek said.

Swatch posted sales of 5.9 billion Swiss francs in 2007. Hayek did not specify when he expects sales to reach the 10 billion Swiss franc mark.

The company's Tourbillon, Blancpain, Breguet, Swatch and Omega brands recorded sales in the first half of January 2008 that were higher than the figure for the whole of the same month a year previously, he added.

However it is not only Swatch but also competitors such as Richemont who can afford to face the new year with confidence while other sectors fret about a looming downturn, analysts said.

Richemont, the world's second-biggest luxury goods maker after France's LVMH, saw its sales rise 14 percent in the third quarter of 2007 to 1.7 billion euros.

John Cox, a luxury goods analyst at Swiss bank Landsbanki-Kepler, said that any downturn will only hit sector players in the second half, as at present their order books are still chock full.

New-found wealth and consumer demand in Asia and the Middle East should also prove a boon to luxury goods makers fearing a slump in other Western markets, analysts said.

"Growing prosperity, international tourism, the 'democratisation' of luxury and the need for social status" have all fuelled demand in recent years, Zuercher Kantonalbank analyst Patrik Schwendimann said.

"'New' markets in China, Russia, the Middle East and, eventually, India" will serve as the motors for future growth, he added.

Hayek also stressed these markets as Swatch's latest priority, telling Finanz und Wirtschaft that "we will reinforce our role as leader in Russia, China and India".

Swiss watch exports as a whole grew 16.2 percent to 15.96 billion Swiss francs, with particularly strong demand from Hong Kong.

Bank Vontobel analysts expect watch sales to grow 10 percent in 2008, with the Olympic Games in Beijing giving a particular spur as Omega is one of the official sponsors.

by Andre Lehmann

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