BASEL, Switzerland, April 2, 2008 (AFP) - International watchmakers pinned their hopes on Asia and other developing economies Wednesday amid warnings the industry could be undermined by the growing turmoil on financial markets.

"In view of the events that have shaken the economic world over the past few months, it is essential that we remain objective and pragmatic," Jacques Duchene, president of the Baselworld 2008 exhibition, told journalists at the opening of the annual showcase fair.

"It (subprime) has already had implications for our business and can be expected to bring further complications in its wake," Duchene said.

However, he stressed the picture was not entirely gloomy, highlighting growing demand from developing economies.

"Although we can expect difficulties in the US market, the new markets have been developing well. This gives us reason to be optimistic for 2008," he said.

"The export figures for the first couple of months of this year are encouraging and the underlying conditions remain satisfactory," Duchene added.

Hong Kong in particular enjoyed a buoyant 2007 with watch exports up 17 percent on an annual basis at 6.3 billion dollars (4.0 billion euros).

For 2008, watch and jewellery exports should grow at a single-digit rate despite the anticipated slowdown in the US, said Benjamin Chau, assistant executive director of the Hong Kong Trade Development Council.

Hong Kong remains a key market for Swiss watch producers, who saw their exports rise by nearly 24 percent in 2007.

The United States, the European Union and Switzerland remain Hong Kong's principal export markets accounting for more than 70 percent of all fine jewellery exports, said Chau.

He said he expected the United States to remain the main export market despite the country's growing economic difficulties, although China was also growing in importance for both high- and middle-end products.

"I think America will still remain our most important market in the foreseeable future," Chau said.

"But the Chinese market is growing in importance ... nowadays the living standards and income levels in China keep on rising ... (and) people need to find ways to spend" their new-found wealth, he added.

Russia, the Middle East and Central Europe are also emerging markets with potential, he added.

"Jewellery, watches and cosmetics are now 'must-buy' items" for the newly-affluent Chinese consumer, Chau said.

"Very high-end consumers from China are looking for European, Swiss brands like Rolex... but for the middle class, they are looking for fashion brands, and I think that there, there is a lot of potential for Hong Kong brands," Chau said.

Many Hong Kong retailers are now opening stores on the mainland, such as the Chow Tai Fook jewellery chain which boasts 300 shops in China.

Products that are "made in Hong Kong" have a strong reputation in China, with customers willing to pay up to a 30 percent premium, Chau said.

Hong Kong manufacturers are also now beginning to commission, market and produce their own brands rather than Western designs made under license, he added.

Some 317 exhibitors will display their wares at the Hong Kong pavillion at the mammoth Baselworld fair that lasts unil April 7.

The fair celebrates its tenth anniversary this year with a total of more than 2,000 exhibitors and over 100,000 people expected to attend.

by William French