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In a blow to the beleaguered Swiss watchmaker, Swatch Group is reportedly set to be ousted from the benchmark Swiss Leader Index (SLI) next month, stock exchange operator SIX announced this week, citing a sharp drop in the company’s market capitalization and dwindling share trading volumes. According to a report by Reuters, the iconic producer of luxury timepieces like Omega, Tissot, and Longines will exit the 30-stock SLI basket on December 22, making way for the newly formed Helvetia Baloise Holding. The replacement stems from the recent merger of Swiss insurers Helvetia and Baloise, forging what is now the country’s second-largest insurance powerhouse. SIX, which typically recalibrates its indexes annually in September, invoked an extraordinary adjustment for this shake-up. The SLI’s makeup is determined by companies’ free-float market capitalization and average trading volumes over the prior 12 months, metrics where Swatch has faltered badly.

Fall in China sales hurt Swatch

Swatch’s stock has shed about 5% over the past year, hammered by sagging sales and a profit nosedive—largely pinned on a steep decline in demand from China, the world’s largest watch market. The fallout has eroded the company’s market value to 8.66 billion Swiss francs (about $10.9 billion), while daily trading in its shares has plummeted by nearly a third this year alone. Swatch shares have lost 5% in value over the last 12 months as sales fell and profits plunged due to falling sales in China. This isn’t Swatch’s first ouster from the index. The group was already bumped from the elite Swiss Market Index (SMI) in September 2021, supplanted by computer peripherals giant Logitech. The SLI serves as a key barometer for Swiss equities, blending the SMI’s top 20 blue-chip heavyweights with the 10 biggest mid-caps from the Swiss Market Index Mid (SMIM). It’s a go-to for index-tracking funds, exchange-traded commodities (ETCs), and derivatives, offering investors a streamlined basket of large- and mid-cap Swiss stocks.For Swatch, the demotion underscores broader headwinds in the luxury goods sector, where economic jitters and shifting consumer tastes in Asia have squeezed margins. Analysts say the index snub could further pressure the stock, already trading at multi-year lows, as passive investors rebalance away from the watchmaker.

Rise of smartwatch

Over the past five years, Swatch Group’s financial performance has weakened substantially, underperforming both the broader market and its main rivals. Meanwhile, the rise of smartwatches like those offered by Apple have eaten into the lower-price watch segment where Swatch Group traditionally led. Its shares have correspondingly lost significant ground, delivering an abysmal total return performance.