The chairman and chief executive of the Swatch Group, Nicolas Hayek, has launched a scathing attack against stock exchanges. He singled out the Swiss exchange in Zurich, saying it has not done justice to his group's real value.

In Swatch's annual report, released on Wednesday, Hayek described the Zurich exchange as behaving "in a superficial" way. He said speculation in general had led in some cases to absurd situations and a distortion of the international exchanges that could be compared to a game of roulette.

However, Hayek said Swatch Group management was "absolutely certain" that in the medium and long terms, the stock exchange value of the group would gradually improve and be quoted at its rightful level.

The group, based in Biel, has 18 brands, including Breguet, Blancpain, Omega, Longines, Tissot and Swatch.

Hayek said that in "this time of upheaval and instability", no head of a company quoted on the stock exchange could ignore shareholder value.

"Shareholder value is the value of your shares quoted on the stock exchange. In comparison to the business trend and the substance of our group, it has little to do today with what the group is really worth," he said.

"There is naturally the fact that the stock exchange, with its usual superficial way of comparing the Swatch Group with luxury, high-tech or other firms, has still not been able to grasp the mission, the diversity, the importance and the real substance of the group's stock," he added.

Hayek said that over the past two years, trends on international stock exchanges had been incomprehensible for many entrepreneurs, especially for innovative and well-established companies.

"Fear, constant doubt, speculating to make quick if not immediate gain, with great ease and little effort, are leading in several particular cases to absurd situations and a distortion of the international stock exchanges that can often only be compared to a game of roulette," he said.

"When speculators buy shares in companies and want to sell them at a good profit days, weeks or months later, [they inflate] the value of the stock of quite stable and modest companies to completely unrealistic levels," he added.

The year 2000 was another year of records for the Swatch group, with sales exceeding the SFr4 billion mark ($2.31 billion) for the first time. Net profit reached SFr651 million, almost 50 per cent higher than the figure for 1999.

"This is the highest profit level ever achieved by the Swatch Group [and] is probably the largest in the whole watchmaking industry worldwide, with a cash-flow of SFr890 million," Hayek said.

The board of directors is proposing to the annual general meeting that SFr172 million be distributed among shareholders, representing double the dividend that was paid out last year.

The board also wants to offer a 10-to-1 split on Swatch Group shares to enable a number of non-specialised investors with more modest means to invest to buy shares.

"This means that a larger and more diverse circle of those people who are our customers, who buy our watches and put their trust in us will be shareholders too," Hayek said.

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