Swiss Watches Unworn as China Tackles Graft: Chart of the Day

Swiss Watches Unworn as China Tackles Graft: Chart of the Day

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China’s love affair with glitzy Swiss timepieces is ending, as President Xi Jinping’s campaign against corruption makes targets of wearers.

The CHART OF THE DAY shows Chinese imports of Swiss-made watches tumbled 24 percent in the first quarter from a year earlier for a third straight decline, while shipments to Hong Kong sank 9.3 percent, according to trade data from Switzerland. The lower panel compares shares of Hengdeli Holdings Ltd. (3389) and Emperor Watch & Jewellery Ltd. (887), the biggest watch retailers traded in Hong Kong, versus the Hang Seng Index, Swatch Group AG and Cie. Financiere Richemont SA, the owner of the Cartier brand.Hermes International (RMS) SCA reported a drop in first-quarter watch sales due to a slowdown in China, while LVMH Moet Hennessy Louis Vuitton SA (MC), the world’s largest maker of luxury goods, said Chinese retailers have been buying fewer watches than expected. Communist Party official Yang Dacai was fired last year after photos posted online showed him wearing 11 luxury watches at different times, earning him the nickname “Brother Watch,” according to Xinhua News Agency.

“The corruption crackdown campaign is having a big effect on luxury watch sales,” said James Roy, senior analyst with China Market Research Group in Shanghai. “High-end watches are very common gifts and they are items that are quite conspicuous and associated as a sign of corruption.”

Hengdeli (3389) is more vulnerable to weaker demand for luxury watches than global companies such as Swatch (UHR) or Richemont, which have seen their shares rise, Roy said. Hong Kong, the world’s biggest importer of Swiss watches, is a popular buying center among mainland Chinese because of tax exemptions and a weaker currency. Greater China bought more than a quarter of Swiss-made timepieces by value last year, according to the trade-group data.

President Xi, who took over as party secretary in November, has forced officials to cut down on lavish receptions as well as banned the use of military number plates on top-end car brands including Porsche, as he seeks to shield the party from accusations of corruption. Large-restaurant and catering sales fell for the first time in more than three decades in the first two months of the year, official data showed, while prices for Moutai liquor slumped, according to HSBC Holdings Plc.

To contact the reporter on this story: Billy Chan in Hong Kong at bchan101@bloomberg.net

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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