* Demand still weak in main markets of Hong Kong, USA
* Exports to China rise 20 percent
(Adds detail, background)
By Katie Reid
ZURICH, Sept 22 (Reuters) - Demand for Swiss watches fell 22 percent in August, when the pace of decline eased for the second month in a row, but appetite for timepieces remained weak in the key Hong Kong and U.S. markets, the Swiss watch federation said.
The value of sales slipped to 843 million Swiss francs ($814 million) in August, falling below 2006 levels. Swiss watch exports have fallen 26 percent to 8.1 billion francs so far this year, the industry body said on Tuesday.
“August, which is traditionally a quieter month for the branch, saw 1.1 million watches exported from Switzerland, i.e. 590,000 less than in August 2008,” the Federation of the Swiss Watch Industry said in a statement.
Exports to Hong Kong tumbled 26 percent, while U.S. demand shrank by 37 percent. But appetite for watches rose 20 percent in China, making it the third most important market for Swiss exports in August.
“Swiss watch exports in August continued the trend with just a slight slowdown in the decline. It is in line with expectations. The positive surprises were China, up 20 percent, and Singapore, up 9.6 percent,” said Vontobel analyst Rene Weber.
“This confirms our case for Swatch Group UHR.VX with highest exposure to Asia ex Japan,” he said. “We also expect a decline of 20 percent for September due to a high comparison base, but the fourth quarter of this year should get easier.”
The industry, home to Swatch Group, the world’s largest watchmaker, and luxury goods group Richemont CFR.VX, is facing its most severe drop in demand in 20 years as consumers spend less on luxury items due to worries about job losses and the shrinking value of their portfolios.
But some watchmakers, such as Swatch Group, have hit a more optimistic tone about the outlook in recent weeks. [ID:nLR373263]
At 0720 GMT, shares in Swatch Group were down 0.2 percent at 235.90 francs, while Richemont shares were flat at 29.32 francs. The DJ personal and household goods index .SXQP was trading 0.3 percent higher.
Demand for watches costing 200-500 francs at export price remained the most resilient category, contracting 15 percent, while the fall in exports of watches priced over 500 francs posted a relative improvement on previous months, with their value 23 percent lower, the federation said.
“For the sixth consecutive month, the lower-priced segments performed better than the overall market,” said Citi analyst Thomas Chauvet.
“While this may reflect short-term trading-down consumer behaviour, we argue it is unlikely to become a secular trend post the cycle. Over the past few years, the upper segment has consistently performed better than lower price points.,” he said. (Editing by Dan Lalor) ($1 = 1.036 Swiss francs)