Rapaport Magazine

Israel Market Report

Hong Kong Show Brings Salvation

By Avi Krawitz
RAPAPORT... The Hong Kong International Jewellery Show gave Israeli diamantaires the boost they were seeking for 2008, as the Far East continues to prove an effective hedge against the U.S. market decline.

“The Hong Kong show was very good,” said Rony Eitany, owner of Regent Diamonds, which manufactures 1 to 10 carats plus in all shapes, including fancy colors. “Before the show, I was very doubtful because of the recent price increases and the global atmosphere. But I am now more optimistic for 2008.”

The positive feedback provided further evidence of the Israeli market’s successful penetration into the Far East. Through January and February, Israel’s polished diamond exports to Hong Kong exceeded those to the U.S., marking a clear shift in market forces at play.

Haim Katz, of Haim Katz Diamonds, which specializes in top-make diamonds in a variety of shapes and sizes, noted the show exposed his company to a variety of buyers in the region, including markets such as Singapore, Vietnam and Malaysia. “It was great. Hong Kong was very strong for us,” he said.

Most diamantaires who spoke to RDR agreed that there was strong demand at the show for 3 carats and up, but that the market was still adjusting to the new price lists on larger stones in the 10-carat range. Avraham Eshed, a member of the board of the Israel Diamond Manufacturers Association (IDMA) and president and chief executive officer (CEO) of Gemstar–Eshed Diam, which manufactures emeralds and diamonds of 2 to 25 carats in all shapes, including fancy colors and matching pairs, expects it will take approximately six weeks for the market to make the adjustment and that the Basel show in April will provide a better test for the new lists.

As a result, Eshed said that D flawless, 10 carats and up, in the price range of $140,000 per carat and higher sold in smaller quantities than expected at the Hong Kong show, while “we saw huge demand for 3 carats and up in all goods and we sold mainly in the $110,000 to $115,000 per carat price range.” He added, however, that demand for 10 carats and higher had already started to rise toward the end of March.

Erez Haimoff, a manager at Delta Diamonds, specialists in rounds, fancies and ideal cuts, felt that the Hong Kong show’s timing contributed to its success, given that it falls after the Chinese New Year, since buyers already had sold their goods for the new year gift giving and were ready to buy again.

Networking Opportunity
Eshed placed more emphasis, however, on the networking opportunities that Hong Kong and other shows provide. “The shows are most importantly an opportunity to meet clients, to forge a relationship with them,” Eshed added, noting that the Basel show would attract different clients from Europe, the U.S. and the Middle East who were not at Hong Kong. He went on to predict that Basel would be at least as successful as Hong Kong in sales and networking opportunities.

Eitany’s company projections for 2008 hinge on the success of these two events. “I have a feeling that if we have strong Hong Kong and Basel shows, 2008 will be a very good year, and, if not, the year may be slower than 2007,” Eitany explained. “So we are one step of the way there and I believe Basel will also be very good.”

Shekel Wary
Despite the confidence boost from the Far East, world markets tempered the optimistic mood when gold broke the psychological $1,000-an-ounce level March 13, before significantly retreating a few days later, and the dollar continued its free fall against major currencies, including the shekel.

The shekel gained a further 7.6 percent on the greenback between March 1 and March 19 to trade at 3.37 shekels to $1, its highest level since April 1997.

The shekel’s appreciation led the Bank of Israel to intervene in currency markets for the first time in 11 years, as it bought an estimated $100 million in foreign currency in an attempt to stem the shekel’s rise before it causes “serious damage” to the economy, in particular the export sector.

Eshed argued that instability in the currency markets would ultimately help the diamond trade, particularly in Israel’s specialty big stones, as consumers move their money to real assets. People consider diamonds to be a commodity, which they can transport and which have some liquidity, he explained.

“The dollar is lousy, but there are still a lot of buyers in the market because there is still enormous wealth in the world today, even in the U.S.,” Eshed said. “There is more money than goods.”

The Marketplace
• There was a clear shift in polished export numbers for January and   
   February as Israel sent more to Hong Kong than to the U.S.
• Traders expect price increases to continue, especially for 3 carats+.
• Rough prices are expected to continue to rise.
• 3 carats remain in strong demand and 50- to 70-pointers are moving well.
• 10 carats+ are quiet as buyers adjust to new prices.
• Demand is good for clean goods, 
  particularly in VS2+ and fancy colors.
• Traders are optimistic that the Basel show will pick up where strong Far  
  East events left off.

Article from the Rapaport Magazine - April 2008. To subscribe click here.

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