Why UAE residents are choosing luxury watch auctions for alternative ways to hedge against volatility

For many expatriates, watches priced in US Dollars and Swiss Francs, can act as a collectible currency hedge. Take the example of the Indian Rupee – over the past 12 months, the currency has devalued against the UAE Dirham by up to 8%. Given the USD/AED peg, and the historic weakening and volatility of the Rupee, quality watches represent a solid hedge against such currency movements. Watches are easy to store, insure, move and in many cases with highly collectible references, provide liquidity. Of course, different rules apply if the resident Indian in the UAE were to repatriate timepieces, as significant duties and tariffs can undermine performance.

Luxury watch values have grown by an average of 125.1% over the past 10 years, outstripping other alternative assets like coins, jewellery, handbags, wine, art, cars and coloured diamonds. Wealthy individuals and family offices are shifting portfolios towards diversification. The performance of luxury watches at the upper end has been robust and we have seen a strong trend for South Asian expatriates selecting pieces that may preserve wealth and grow in value over time.

Similarly, many high-end timepieces feature precious metal dials and cases including gold, platinum, and amongst brands such as F.P. Journe, rare-machined metals such as tantalum. These materials alone carry significant value.

Indian expatriates account for over 4 million people in the UAE, growing at around 7% per year. Knight Frank assesses that there are 130,500 ‘dollar millionaires’ in the UAE, and while no exact figures are available by nationality, it is fair to assume that 20 to 25% of those millionaires are Indian. There are also 10 Indian billionaires who reside in the UAE. This sizable pool of wealthy Indians underscores a strong impact on global luxury watch auctions.

The growth of the Indian population within the UAE is not confined to migration. South Asian parents across the Emirates have children who call cities like Abu Dhabi and Dubai ‘home’. For the youth whose parents made the transition to the UAE in its earlier days, they have grown up as ‘third-culture’ kids, and now as their parents grow older there is a significant transfer of responsibility and wealth. A co-authored whitepaper by DIFC Innovation Hub, Julius Baer and Euroclear identified that by 2030 more than US$1 trillion in wealth will transfer across families in the Middle East. Indian millennials and Gen-Z audiences are affecting luxury watch auctions in two key ways - firstly, by selling inherited watches that are no longer wanted by the recipient and secondly, as these younger generations access greater wealth than ever before, there comes a desire to purchase quality timepieces. The wealth transfer, particularly amongst Indian high-net-worth audiences, stimulates both supply and demand across auctions.

Timepieces are an integral part of the history of India since independence, with their popularity ebbing and flowing based on a multitude of factors, from fashion trends to increasing economic prosperity. Influential figures across Indian culture have played a role in popularizing timepieces. The political and spiritual leader of India, Mahatma Gandhi, was known to wear a sterling silver Zenith pocket watch. Movie superstar Shah Rukh Khan sets trends amongst high net-worth populations across the sub-continent – for example, the watch community was abuzz that he wore a rose gold Patek Philippe Grand Complication Minute Repeater Perpetual calendar to last year’s MET Gala. Amongst the elite, Anant Ambani has also been known to favour Patek Philippe, owning one of the rarest and most complex watches in the world, the Grand Complications Sky Moon Tourbillon, valued at more than $8 million. Cricket legend Virat Kohli has famously been photographed wearing a Reference 116595RBOW Rolex Daytona Rainbow Everose Gold.

Whether it is a logical approach to diversified wealth preservation, or simply wanting to mirror the styles of sporting icons, Indian expatriates within the UAE are an increasingly important audience for luxury watch brands and auction houses.

- The writer is CEO of FutureGrail