Reporting its first-half results on Friday, the world's biggest watchmaker, Swatch Group, said that its net profit during the six-month period fell 28 percent, due to a marked decline in the demand for watches amid recession.

However, with an upturn in financial markets enhancing its investments, the company's first-half net profit figures of 301 million Swiss francs managed to beat the average analysts' estimates of 275 million Swiss francs.

With the Swiss watch industry facing its sharpest drop in demand, the sales of the Swatch Group - which makes time pieces ranging from the lower-priced Swatch brand to high-end watches like the prestigious Breguet brand - tumbled 15 percent to 2.48 billion francs. Most of the luxury goods groups - including LVMH, Bulgari and Hermes - reported weak demand for watches.

Moreover, Swatch's exports and its operating margin during the period fell 26 percent and 14.7 percent respectively.

Nonetheless, Swatch expects demand to pick up in the year's second half. The company said that its sales have started showing a very 'positive trend' since May, vis-à- vis the first four months.

Commenting on Swatch's optimistic outlook, Citi analyst Thomas Chauvet said: "With an improving macroeconomic outlook, signs of recovery in luxury consumption in emerging markets, and softer sales and earnings comparatives in the second half/fourth-quarter, we argue that Swatch is well positioned against most hard luxury peers."