ZURICH, Aug 20 (Reuters) - Swiss watch exports to their top market Hong Kong fell a modest 1.3% in July amid increasingly violent anti-government protests in the former British colony that have weighed on watch sales.
That was a sharp improvement from the 27% drop in June.
Overall exports by the sector rose 4.3% to 1.9 billion Swiss francs ($1.94 billion) in July.
One of the world's most popular shopping destinations, Hong Kong is on the verge of its first recession in a decade as mass demonstrations scare off tourists and bite into retail sales.
Hong Kong leader Carrie Lam said on Tuesday she hoped a peaceful weekend anti-government protest was the start of an effort to restore calm and that talks with non-violent protesters would provide "a way out" for the Chinese-ruled city.
The Asian financial centre that reverted from British to Chinese rule in 1997 is the biggest foreign market for Swiss timepieces, absorbing 13.5% of the exports by value in July.
The U.S. market had a 10.1% share and China 8.0%, Federation of the Swiss Watch Industry data showed on Tuesday.
Vontobel analyst Rene Weber said in a note last week that Hong Kong was one of the most important market for Swiss watchmakers Swatch Group and Richemont, representing about 11% of their sales.
Kepler Cheuvreux's Jon Cox said he had cut growth assumptions for this year and next. He also reduced earnings per share estimates for Swatch Group by 6% and for Richemont by 4% over the next two to three years.
Swatch shares have lost 7.5% while Richemont stock has gained 19.3% this year.
$1 = 0.9803 Swiss francs Reporting by Silke Koltrowitz and Michael Shields, Editing by John Miller