Business
Swiss watchmakers counting the clock until Chinese tourists return
Switzerland’s major luxury watch brands are cautiously optimistic that Chinese tourists will boost sales this year, if they return to Europe in large numbers after the easing of domestic Covid-19 restrictions.
Exports to China, a key market for watchmakers, contracted by 13.6 per cent in 2022 due to Beijing’s zero-Covid policy and the surge in infections when it was lifted at the end of the year.
However, exports began to rebound in February – up 8.2 per cent year-on-year, according to the Federation of the Swiss Watch Industry.
“China will regain a positive dynamic,” the federation’s president Jean-Daniel Pasche, told AFP at the industry’s annual Watches and Wonders trade fair in Geneva, where 48 brands such as Rolex, Cartier and Patek Philippe were showing off their latest creations.
With China reopening, many financial analysts have sharply raised their growth forecasts for the luxury sector as a whole in 2023.
During Covid-19 lockdowns, Chinese consumers built up significant savings, with HSBC analysts pointing to estimates of 6.6 trillion yuan (US$960 billion) in excess savings accumulated over the past three years.
Morgan Stanley analysts expect Chinese consumer spending on luxury goods to increase by 20 per cent in 2023.
According to the US investment bank’s estimates, luxury goods lovers in China made up about 60 per cent of the sector’s growth between 2000 and 2019.
Nearly three-quarters of their spending was done abroad, representing a windfall for Europe’s luxury boutiques.
APPETITE FOR TRAVEL
That said, Chinese luxury consumers have become more accustomed to buying domestically during the Covid-19 pandemic.
The Swiss luxury goods giant Richemont sounded a note of caution.
“We see people going back to the stores with an appetite to buy and an appetite to travel,” said Cyrille Vigneron, chief executive of the group’s flagship brand Cartier.
“When a market so important is changing trajectory it has an impact” across the whole of Asia, he told a Watches and Wonders press conference.
But it is hard to predict how the Chinese market will evolve in the short term, said Richemont chief finance officer Burkhart Grund, even though he remains “optimistic for the mid-term development of China”.
“We’ve seen good business during the Chinese New Year, but this has taken place not just in China,” he said, with outbound tourism returning to Asian countries including Thailand and Japan, and the first signs of Chinese tourists returning to Dubai.
“But in Europe, we don’t see it yet.”
FEW FLIGHTS
Guillaume de Seynes, a director at leather goods giant Hermes, had no doubt that the desire to return to Europe “is there”, but flights, “especially to France, are still limited”, he told AFP.
For now, the top priorities at Hermes, which was presenting its new watches in Geneva, remain “to enlarge the average size” of its stores and “gradually increase our presence in China” by opening one boutique a year in a new city, he explained.
Hermes opened a new store in Nanjing in January, taking its number of outlets in China to 27.
In Lucerne, the top tourist destination in Switzerland, the tourism office hopes to see Chinese visitors returning soon “in summer or late spring”, depending on “the availability of visas and flight capacities”, said a spokeswoman for the picturesque city where browsing watch shops is on the must-do list.
Antoine Pin, director of Bulgari’s watch division, said: “We will firstly see wealthy clients coming from China … because the plane tickets are quite expensive.”
Jon Cox, an industry analyst with the Kepler Cheuvreux financial services company, told AFP: “For those companies with distribution in China, I expect a very strong year.
“However, I would not be confident on companies relying on the Chinese returning to Europe this year. It will take a while for the Chinese to come back to Europe in the way they did before Covid.”
The dollar steadied against major peers on Thursday, continuing its near paralysis of the past two days before more concrete announcements on tariffs from U.S. President Donald Trump.
A spate of central bank policy decisions are also due over the next week, with the Bank of Japan widely expected to raise interest rates at the end of a two-day meeting on Friday.
Rate decisions from the U.S. Federal Reserve and European Central Bank are scheduled for Wednesday and Thursday of next week, respectively.
The dollar index – which measures the currency versus six top rivals, including the euro and yen – was flat at 108.25, following two days of gains of around 0.1%.
On Monday, it tumbled 1.2%, its steepest one-day slide since November 2023, as Trump’s first day in office brought a barrage of executive orders, but none on tariffs.
So far this week, Trump has mooted levies of around 25% on Canada and Mexico and 10% on China from Feb. 1. He also promised duties on European imports, without giving details.
“President Trump has so far taken a less hostile-than-expected approach to China,” amid overall “softer-than-expected policies and tone on tariffs”, said Carol Kong, a currency strategist at Commonwealth Bank of Australia.
At the same time, “we are cautious (that) risk sentiment remains fragile and can quickly turn sour if President Trump strikes a more aggressive tone.”
The Chinese yuan was little changed at 7.2812 per dollar in offshore trading .
Wall Street’s main indexes rose Wednesday, with the S&P 500 hitting an intraday record high thanks to strong Netflix earnings and a rally in tech shares.
Japan’s yen edged up about 0.1% to 156.40 with markets pricing 95% odds of a quarter-point hike on Friday.
The euro was flat at $1.0411. The ECB is widely expected to cut rates by a quarter point next week.
The Canadian dollar held steady at C$1.4386 against the greenback. The Bank of Canada is seen as likely to reduce rates by a quarter point next Wednesday.
The Mexican peso was little changed at 20.47 versus the U.S. currency.
Oil prices dipped in early trade on Thursday, extending losses amid uncertainty over how proposed tariffs by U.S. President Donald Trump on several countries would impact global economic growth and energy demand.
Brent crude futures fell 23 cents, or 0.3%, to $78.79 a barrel at 0135 GMT, while U.S. West Texas Intermediate crude (WTI) eased 18 cents, or 0.2%, to $75.26.
In its previous session, Brent futures settled at $79.00 in a fifth straight day of losses. WTI futures settled at $75.44 in a fourth consecutive day of declines.
Trump has said he would add new tariffs to his sanctions threat against Russia if the country does not make a deal to end its war in Ukraine. He added these could be applied to “other participating countries” as well.
He also vowed to hit the European Union with tariffs, impose 25% tariffs against Canada and Mexico, and said his administration was discussing a 10% punitive duty on China because fentanyl is being sent to the U.S. from there.
Meanwhile, estimates from an extended Reuters poll showed that on average U.S. crude oil stockpiles were expected to have fallen by 1.6 million barrels in the week to Jan. 17.
Gasoline stockpiles were estimated to have risen by 2.3 million barrels last week, and distillate inventories were likely to have gained 300,000 barrels.
The poll was conducted ahead of the American Petroleum Institute industry group’s report and another from the Energy Information Administration at 12:00 p.m. ET (1700 GMT) on Thursday.
European wind shares fell on Tuesday (January 21).
The reports were delayed by a day due to the Martin Luther King Jr. Day federal holiday on Monday.
Pakistan and Saudi Arabia have reaffirmed their commitment to further strengthening the bilateral economic ties for shared prosperity.
The commitment was expressed when Finance Minister Muhammad Aurangzeb met with his Saudi counterpart Mohammad bin Abdullah Al-Jadaan on the sidelines of World Economic Forum Annual Meeting in Davos.
Muhammad Aurangzeb highlighted the key reform measures undertaken by the Government to promote economic stability and sustainable growth.
He briefed him on structural reforms, fiscal discipline and regulatory improvements that have contributed to an improved investment climate in Pakistan.
Earlier, Aurangzeb met Anna Bjerde, Managing Director of Operations at the World Bank.
They discussed cooperation between Pakistan and the World Bank, with a particular focus on Pakistan’s macroeconomic stability.
The finance minister emphasized the government’s strong partnership with the Bank and expressed hope that the World Bank would continue playing a key role in the country’s socio-economic development.
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