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Hong Kong
By Mary Kavanagh
As the Year of the Horse kicked off in Hong Kong on January 31, the stock market crashed to its lowest level in seven months when the Hang Seng Index lost 2.9 percent. It was the worst opening day of trading in a lunar new year since 2008. Feng shui masters and astrologers predicted that the Year of the Horse will bring troubling times to the city. Noting that this lunar new year is characterized by wood and fire, Ma Lai-wah, feng shui master, told South China Morning Post, “the fire is so strong, it will cause an explosion” and “the economic bubble might burst.” By mid-February, the stock market showed signs of improvement. Stocks rose, with the benchmark index capping its biggest weekly gain in five months, and the Hang Seng Index gained .6 percent, its biggest weekly increase since September. Stocks of listed jewelry companies Luk Fook Holdings (International) Ltd. and Chow Tai Fook Jewellery Group Ltd. traded higher by .4 percent and .6 percent, respectively. Ephraim Zion, managing director at Dehres Ltd. diamond jewelry manufacturers, was cautious in his forecast for the diamond business in 2014. “I think generally speaking, this will be a quiet year, similar to 2013,” he said. “I hope I am wrong, but that’s my feeling.” He said business was good, but “not booming” over Christmas, with sales similar to 2013 but “more subdued,” and January was very quiet. “Since Chinese New Year, it is getting a bit better, hopefully on the road to full activity,” he said.
The Hong Kong Retail Management Association (HKRMA) reported that retail sales in the city grew 5.7 percent year on year in December. “It’s very rarely this bad. In 2012, it was an 8.8 percent increase,” Caroline Mak, chairwoman of the association, told South China Morning Post. She added that the single-digit growth in sales in peak holiday months in 2013, such as October and December, was not as good as usual. Sales of jewelry, watches and clocks and valuable gifts increased 24.8 percent for the calendar year. But December sales, according to Mak, although better than November, were disappointing and “only recorded a high single-digit growth of 9.1 percent in sales value and a mid double-digit growth of 15 percent in sales volume.”
The wholesale market for diamonds has been slow in recent months. “Business for the final quarter of 2013 up to the present time has been quiet,” according to a spokesperson for Eternity Manufacturing Ltd., a wholesaler of polished diamonds. He described the market as “sluggish” and noted that Hong Kong traders have trimmed their stock and “adopted a wait-and-see policy” on replenishing inventory. “Diamond wholesalers usually keep huge stocks,” he said. “During the past few years, when the interest rate was so low, they took advantage of the low cost of capital to keep large stocks. Now they are being cautious and waiting to see what the U.S. Federal Reserve is about to do” regarding interest rates and capital supply, he said. “Tight liquidity in Mainland China” has also negatively impacted the wholesale market, the spokesman reported, adding that “The long Chinese New Year holidays brought business to a standstill.” Yet he was hopeful that once the holiday period was over, “the market would kick-start again. More financial data about the U.S. and global economies would come to light then and would enable the diamond traders to plan ahead for the next few months.”
The Gemological Institute of America (GIA) has been working with the World Federation of Diamond Bourses (WFDB) to identify bourses that will receive DiamondCheck, a synthetic diamond detector just introduced by the GIA. The Hong Kong bourse has been identified as one of the recipients. The equipment, provided by GIA under a no-cost lease, was installed in the bourse at the end of February. For more information, see Weeding Out Synthetics in the Industry section. Zion was very happy about the upcoming installation and described it as “an excellent instrument” and “a tremendous step in identifying synthetic diamonds.” The spokesperson for Eternity Manufacturing was also looking forward to having the new equipment in the city, noting that it will definitely be helpful to the trade.Article from the Rapaport Magazine - March 2014. To subscribe click here.
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