RAPAPORT... The annual Hong Kong International Jewellery Show, the city’s second largest jewelry show, was held March 4 through 8. The show had an ominous start with the collapse of the Hong Kong stock market to new lows during the show’s early days, but overall, it did much better than expected. Even though it was a far cry from a typical March jewelry show, buyers did show up and deals did get closed.
The Hong Kong Trade Development Council (HKTDC), the show’s organizer, announced an 80 percent drop in visitors — to 7,000 — on the first day of the show, which was immediately apparent as the traffic was a mere trickle. But, by the close of the show, the organizers reported that the actual overall number of visitors was down by only 15 percent, for a total of 30,000 registered buyers. There was a noticeable decrease in overseas buyers, but this was compensated for by an increase in local visitor registration. HKTDC reported that it had sent out more than 2,000 invitations to potential buyers, even sponsoring their trips to Hong Kong in order to boost attendance.
Looking for DealsThere was a marked drop at the show in the number of Indian buyers, who have been the stalwarts of every recent show. Those who did come to the show came with an aim to buy really cheap. Apparently, they thought that if they held out their ability to buy large quantities, they could buy at give-away prices.
Exhibitors reported that the Indian buyers all used the same mantra — that they were forced into making the very low offers because of the disparity in the exchange rate of the Indian rupee and that they were not able to pay for the goods in cash because that would mean paying 6 percent more at the prevailing rates. That approach didn’t work with most of the suppliers, who were not willing to sell their goods at a loss for the sake of making a sale.
That is not to say that there weren’t some very low prices being accepted. This was most evident with some Indian and Japanese exhibitors, who had the advantage of being able to use their exchange differences to buffer low prices. Things definitely started to look up on the show’s third day, when rejected buyers came back with better offers after realizing they could not buy at the prices they initially offered.
One thing that was heartening, despite the low offers and difficulties in finalizing deals, was that there was still faith in diamonds, as buyers were still in attendance and still making offers. True, they wanted to buy as cheaply as possible, but nevertheless, it was an improvement over the situation of just a few months earlier, when people did not want to even make an offer for fear the prices of diamonds would deteriorate in the months to come. The fact that deals for goods were being closed also shows some confidence in the current price stability of diamonds.
Hopefully, the industry is reaching the bottom of the market, or at least very close to the bottom, and it will soon begin leveling off. No one expects a quick rally because consumer sentiment is still very much in a defensive mode. We may be in the lull of a storm; much will depend on the direction and force of the tail end of the storm.
Lower Color, Clarity and PriceIn order to find lower levels of prices, many buyers are now looking for diamonds in lower colors and clarities. Both the Chinese and Indian markets have dropped the color of the goods normally in demand and, as a result, goods in K to M in VVS and VS are moving quite briskly in a wide range of sizes.
Strangely enough, stones larger than 10 carats are still being sought, but in H and lower colors. The market for the very top qualities in 10 carats and larger is definitely weaker, but there are sporadic demands for these as well.
Relaxed Restrictions
The good news is that there will be a relaxation in the travel restrictions for Mainland Chinese coming into Hong Kong, starting on April 1. The first step is to allow multiple entries by registered residents of Shenzhen, just across the border. Even those residing in Shenzhen but not registered will be allowed to apply for individual visit permits, starting May 1.
More good news is a recent development in May’s Golden Week. In 2008, the government cut the holiday back to only one day — May 1 — in order to promote austerity in spending. But, now that the government is trying to stimulate spending, it has reinstated the weeklong May holiday. Not only is this expected to stimulate consumer spending on the Mainland, but it also will encourage more visitors to Hong Kong during the period. In anticipation of improved sales during the longer holiday, local retailers might be expected to stock up.
The Marketplace
• Demand is still strong for goods suitable for the Chinese market, beginning in 1/10-carat sizes up to 1-carat sizes. The color range has been increased to include K and L.
• Demand is good for large-size princess cuts of 3 carats+ in H to J colors and for fancy shapes in pears, hearts and ovals in 1 carat and larger, in H+ colors and in VVS to SI.
• Demand is good for dossiers with triple EX but supply is short.
• Demand for small setting sizes is very slow and the defaults and slow payments by Hong Kong jewelry manufacturers are scaring suppliers.
Article from the Rapaport Magazine - April 2009. To subscribe click here.