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Hong Kong Momentum
Editorial
Mar 7, 2014 8:00 AM
By Avi Krawitz
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RAPAPORT... The Hong Kong International Jewellery Show that took place this week injected some confidence into the diamond trade, even though the market is not booming. That the show was okay, and met expectations, was enough to ensure that the positive mood that has engulfed the diamond industry so far in 2014 will continue – at least in the near future.
The diamond industry tends to place a strong emphasis on the March show as it is the first major trade event after Christmas, and more importantly, the Chinese New Year. Wholesalers and retailers should be looking to replenish sold inventory and diamond dealers ought to be filling orders accordingly.
However, the reality of recent years is that buyers are prepared to wait out unfavorable market conditions before making large bulk orders. Retailers are cautious about buying excess goods and are managing with leaner inventory than before.
The market has hardly been favorable to buyers this year as polished prices were relatively high going into the show. The RapNet Diamond Index (RAPI) for 1-carat certified diamonds rose 1.5 percent in the first two months of the year, while RAPI for 0.30-carat and 0.50-carat diamonds increased by 4.6 percent and 4.5 percent respectively. Then again, prices for most categories declined in 2013.
Diamond manufacturers had a good month in February as polished prices firmed up and De Beers, somewhat surprisingly, kept its rough prices stable. Manufacturers are subsequently seeing improved profit margins and rough is trading at premiums on the secondary market. Still, manufacturers consider rough prices to be high and some suspect that a steady Hong Kong show might signal a rough price hike at the next sight.
Regardless of the optimistic mood prior to the show, there was concern that buyers would refrain from buying at the higher polished price levels. That seemingly did not transpire and reports from Hong Kong were mostly positive. Buyers want to buy and sellers are holding their prices, even if buyers are resisting attempts to raise them.
According to conversations with exhibitors and buyers, the following trends emerged at the show:
• There is overall good demand for GIA dossiers.
• There is strong demand for round, 0.30-carat to 0.50-carat, H-, VS-SI diamonds.
• Dealers are increasingly looking for non-certified 0.30-carat to 0.40-carat, lower color diamonds in parcels as they see better value than the equivalent certified diamonds.
• Large stones are selling well.
• Triple EX-graded diamonds are in strong demand and relatively short supply.
• Fancy color diamonds are hot.
• Fancy shapes are stable with good demand for ovals and cushions.
• There is liquidity in the market but cutters are concerned about tightening bank credit and high rough price levels.
• Chinese buyers are selective and price sensitive but active.
In addition, there were many exhibitors at the show. This year’s event was larger than ever and marked the first time the March show was split into two locations – or two separate shows – mirroring the September fair.
The inaugural Hong Kong International Diamond, Gem & Pearl Show, which included the loose diamond pavilion, took place from Monday, March 3 to Friday, March 7 – missing the weekend traffic, as many diamond exhibitors noted – while the flagship Hong Kong International Jewellery Show ran from Wednesday, March 5 to Sunday, March 9.
A total 3,850 exhibitors participated across the two events, up from 3,340 last year, the Hong Kong Trade and Development Council (HKTDC), which organizes the events, reported. As a result, while visitor traffic was steady, diamond exhibitors noted that buyers were scattered in the massive halls of the show.
There was an abundance of diamonds on display, with dealers from every major center attending, or sending goods with other suppliers. Trading in Antwerp, Mumbai, Ramat Gan and New York was consequently rather quiet this week as the focus shifted to the east.
The additional 500-plus exhibitors certainly did not ensure the show’s success. Rather, it is further indication that the ‘show business’ has become a numbers game for many organizers. For the trade, it is ultimately the quality of the buyers, and not the quantity of exhibitors, that determines the success of such an event. As a trade organization, the HKTDC may inadvertently be doing its constituents a disservice by expanding the show to such an extent.
In fact, some exhibitors were forgiven for feeling slightly lost in the crowd as buyers had more than sufficient choice to shop around in Hong Kong. Many who spoke with Rapaport News noted that the overall mood was positive because there was general activity, but not everyone had a great show as it was difficult to spread the wealth among so many.
Suppliers are consequently starting to question whether the expense incurred to participate in all these shows is worth it and they will become more selective regarding which shows to attend, if they haven’t already. That may explain the rising interest in the diamond trade-specific events such as those organized on the trading floors in Antwerp, Israel and New York, and The Diamond Show that is taking place in Basel from March 27 to 31.
For now, the Hong Kong show remains an important indicator for the market. Despite the solid start to 2014, diamantaires needed assurance that their Far East clients are active, particularly as China embarks on economic reforms that could spell uncertainty for the diamond and jewelry sectors. They at least got that assurance even if it was the buyers, and not the suppliers, that influenced polished prices at the show. Prices increased in January and February but did not rise at the show, nor did they decline.
Therefore, the March Hong Kong show was not bad, and that’s good enough. The stable – albeit separate – loose diamond trading met expectations. Despite lingering concerns about pending rough and liquidity challenges, that should be sufficient to ensure that the positive momentum witnessed in 2014 will continue – at least for now.
The writer can be contacted at avi@diamonds.net.
Follow Avi on Twitter: @AviKrawitz and on LinkedIn.
This article is an excerpt from a market report that is sent to Rapaport members on a weekly basis. To subscribe, go to www.diamonds.net/weeklyreport/ or contact your local Rapaport office.
Copyright © 2014 by Martin Rapaport. All rights reserved. Rapaport USA Inc., Suite 100 133 E. Warm Springs Rd., Las Vegas, Nevada, USA. +1.702.893.9400.
Disclaimer: This Editorial is provided solely for your personal reading pleasure. Nothing published by The Rapaport Group of Companies and contained in this report should be deemed to be considered personalized industry or market advice. Any investment or purchase decisions should only be made after obtaining expert advice. All opinions and estimates contained in this report constitute Rapaport`s considered judgment as of the date of this report, are subject to change without notice and are provided in good faith but without legal responsibility. Thank you for respecting our intellectual property rights.
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Tags:
Avi Krawitz, De Beers, diamonds, Hong Kong, Rapaport
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