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Hong Kong
By Mary Kavanagh
Business continued to be tough for Hong Kong’s diamond industry in the early weeks of the new year following a difficult 2015. Retail sales fell 7.8 percent in value and 6 percent in volume in November, putting the city on track for its worst performance since 2003 when SARS hit. At that time, retail sales for the full year decreased 2.3 percent in value compared to a drop of 3.1 percent in value for the 11 months up to the end of November 2015. Thomson Cheng, chairman of the Hong Kong Retail Management Association (HKRMA), predicted the full-year figure for 2015 to have fallen by 3 percent at least and many of the association’s members have predicted a single-digit decline for 2016. Tourist numbers to Hong Kong over the Christmas and New Year period were down 2.53 percent compared to the previous year, with the biggest drop in the number of visitors from Mainland China, which was down 5.45 percent.
“2015 was very challenging in the entire luxury world and we also felt a slowdown,” said Alon Garty, chief executive officer (CEO) and founder of luxury jewelry brand, Van Eyck, and diamond trading company, Windiam Asia. Van Eyck is a high-end fine jewelry brand that sells pieces in the $20,000 to $200,000 price range and targets high-net-worth individuals who already own diamond jewelry and are looking for something unique. “Our customers have money, but they are not in the mood to buy,” he said. On the wholesale side, last year was the worst year since the 2008 crisis, according to Garty. “It’s different from the 2008 crisis,” he said. “Prices crashed in 2008, but came back up after ten months and we had a lot of bargains and opportunities, but the current crisis has been ongoing since 2014 — 18 months — that’s a long time,” he added. Garty saw a slight pick-up in business toward the end of last year, mostly for large stones — 5 carats and above for fancy colors on an order-basis only and 10 carats and above for white diamonds. Simon Zion of Dehres Limited also reported that business in recent months has been challenging. “It was a difficult season and we are feeling it tremendously the past five to six months,” he said noting that the anticorruption campaign in China had hit the Hong Kong, Macau and Taiwan markets hard.
The market for colored gemstones has increased over the past year. According to Zion, the high level of transparency in the diamond industry has made it more difficult for wholesalers, brokers and retailers to make the same profit margins as before. “I think this is a major factor pushing people into the colored stone business. There is a much wider range of goods, and the goods are generally much cheaper in total value so customers who are a bit more cautious in how they spend their money, yet still want to buy an impressive necklace with big stones, can do that,” he said. The increased demand for rubies, emeralds and sapphires has also been influenced by the recent success of these stones at the Sotheby’s and Christie’s jewelry auctions. Over the past year these stones have featured heavily in top ten lists and have repeatedly smashed world record prices. “The most popular gemstones are rubies,” Zion said. These are extremely popular and it seems that every top-quality unheated Burmese ruby that comes to auction smashes records. “We pay a lot of attention to colored stones,” Zion added. “Even in a tough market they are popular.” Customers tend to go for larger gemstones, 2 carats to 3 carats for earrings and 5 carats for main stones.
Exhibitor feedback from 2015’s three main international jewelry shows in the city was not overly positive. The Hong Kong International Jewellery Show will take place from March 1 to 7, at two venues in the city. Dehres Limited will be exhibiting and, although hoping for an improvement over 2015 show, Zion is realistic in his expectations. “The shows last year were not as good as in previous years and we anticipate it to be similar in 2016,” he said. “The March show is the most important show in Asia, along with the September show, and we definitely won’t be giving it up, although we have had a few difficult years.” Garty, on the other hand, has made a strategic decision for Windiam not to exhibit at any of Hong Kong’s international jewelry shows this year — for the first time in 15 years. “When I started to do the exhibitions in Hong Kong, there were 18 diamond exhibitors. Now in March, there are more than 800,” he said, noting that there was not necessarily the equivalent increase in customers to match that of exhibitors. “The shows used to account for 30 percent of our annual turnover in sales, but today it is 10 percent,” he pointed out, adding that the commitment of time and resources necessary to exhibit doesn’t make sense for them any more. The future is uncertain for industry players and many find it difficult to anticipate which direction to move in next. Only time will tell if the market has already bottomed out and if there is hope of a recovery this calendar year. Everyone is hoping for better days.Article from the Rapaport Magazine - February 2016. To subscribe click here.
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