Swatch shares rise more than 10 percent on China hopes
Published: Thursday, Sep 26th 2024, 15:00
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The share prices of the jewelry and watch group Richemont and especially those of the watch group Swatch climbed on Thursday. Both stocks, which have been badly battered recently, are being driven by hopes of an improvement in the important sales market of China.
At Swatch, statements by Group CEO Nick Hayek on a possible delisting of the share also fueled the price recovery. By 2.45 p.m., Swatch Group bearer shares had climbed 11 percent to 174.20 Swiss francs on the Swiss stock exchange, having risen by around 4 and 6 percent in morning trading before Hayek's statements became known. The leading SMI index was only up 0.4 percent.
Meanwhile, rival Richemont shares (+7.4 percent to CHF 130.40) also rose significantly. Swatch and Richemont are thus continuing the price recovery that began this week. On Monday, Richemont was still trading at less than CHF 115 and Swatch was only able to close trading slightly above the CHF 150 mark.
Tailwind with hopes for China
While news of weak consumer sentiment in China was the main reason for the fall in share prices in recent weeks, there is now a tailwind from the "Middle Kingdom". After the Chinese central bank fanned hopes of further interest rate cuts on Tuesday by raising a rather secondary key interest rate, the Chinese government doubled down on Thursday with calls to support the economy.
China's leaders called for further aid for the ailing real estate market, higher tax spending and an improvement in sluggish consumption. According to a report by state agency Xinhua, the top cadres of the Communist Party also emphasized during a meeting chaired by state and party leader Xi Jinping that the economic targets for this year must be achieved.
Although no exact figures or plans to implement these demands were given, the financial market saw them as a clear commitment by Chinese politicians to give the weak economy a boost. In particular, the statement on promoting consumption is a good sign for the luxury goods industry. After all, uncertainty among Chinese consumers had severely curbed demand for jewelry, expensive watches and clothing in recent months.
Speculation about stock market withdrawal boosts Swatch
Swatch shares received an additional boost on Thursday afternoon from speculation surrounding a possible delisting. In an interview with the business magazine "Bilanz", Swatch CEO Nick Hayek said that a withdrawal from the stock exchange could be advantageous. "We are considering what we can do." The Hayek family currently holds 28.5 percent of the capital and around 44 percent of the votes in the Swatch Group.
It remains to be seen whether there will be a withdrawal from the stock market and when this will be implemented. Hayek does not see himself under any time pressure.
However, should it come to that, he would pay a premium to the shareholders of the Group, which is currently undervalued on the stock market at around 8 billion Swiss francs. "In the current situation, you would have to pay at least 30 to 40 percent on top," said the Swatch CEO. Hayek was also positive about a recovery in business in China in the coming year.
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