Wikidata chnages show in local wiki watchlist, when interwiki link is added or removed from the wikidata page linked with the watched page.
However, when the link that's added or removed is the link to the wikipedia language, nothing is shown.
The description above is confusing, so i will try to illustrate:
Wikidata page Q1111 is linked to article "AAA" on hewiki.
When the link from Q1111 to fawiki is changed, removed, or added, people who watch "AAA" on hewiki see this change in their watchlist.
However, when the link from Q1111 to hewiki changes from "AAA" to article "BBB", people who watch either "AAA" *or* "BBB" (or both) do not get any indication on their watchlist.
Same thing goes for "add" or "remove" the hewiki link (instead of "change").
this was not tested thoroughly - the user who reported it originally tested it on a couple of articles, and i verified the report by testing a couple more.