Swiss Watchmakers See Shares Tumble As China Announces Ban On Luxury Gift Ads

Luxury watchmakers are watching the Chinese market closely after the country’s government announced a ban on ads for expensive gifts. The announcement from Xinhua, the official press agency of the People’s Republic of China, comes in the wake of repeated calls for a crackdown from the country’s newly-named President, Xi Jinping.

Shares for the Swatch Group, the world’s largest holder of watch manufactures, have tumbled since the announcement. Just days ago, the Bienne, Switzerland-based conglomerate had announced forecasts for strong growth in the year to come, with expansion in the Chinese market playing a key role. Shares for the Richemont group also took a hit after the announcement. Kepler Capital Markets analyst Jon Cox told Reuters, “I think you are seeing profit-taking coming into the stocks, triggered by the news that the Chinese government is going to ban TV and radio ads for watches in gifting.”

With high-profile corruption cases rocking the Chinese Communist Party in recent years, the move by Xi Jinping is being seen as an attempt to revamp the government’s austere image. Although it is too early to tell what the full impact of the ban will have on the watchmaking industry, the Chinese market has becoming increasingly important in recent years. Reuters quotes Cox as saying the Chinese market alone accounts for nearly 10% of Swiss watch sales. Cox added, “There is probably another 40 percent of the market where Chinese dominate such as Hong Kong, Singapore, other parts of greater China and also tourists in Europe, and here the outlook still appears positive.”

Photo courtesy South China Morning Post.