Rapaport Magazine

Hong Kong Market Report

Market Shifts Felt at Show

By Gaston D’Aquino
RAPAPORT... This year is the first time that the Hong Kong Jewellery & Gem Fair’s September show moved all the diamond exhibitors to the AsiaWorld-Expo (AWE), which is situated next to the Hong Kong International Airport.

Although both exhibitors and visitors begrudged the decision, due to the inconvenience of traveling more than an extra hour every day to visit the show, early reactions were that it was not so bad after all. Judging from the first-day attendance at the event, held September 21 to 25, it seems that most of the regular buyers were at the show, along with some new faces. As an added plus, the exhibition halls are linked together so when all three were opened up for the new diamond pavilion, there was a feeling of spaciousness and attendees really could not feel the crowd.  

As an exhibition venue, AWE is definitely better than the original site, the Hong Kong Convention & Exhibition Centre (HKCEC), which has grown to its present size after a number of LEGO-like expansions, the latest one completed only a month ago. UBM Asia, the organizers of the fair, reported that with the new AWE diamond pavilion and the expansion at the old HKCEC site, this year’s show has grown to be the biggest international jewelry show, with more than 3,000 exhibitors. Reports are that the diamond pavilion will be calling the AWE home for the next few years so, if and when the diamond pavilion grows in size, more exhibitors undoubtedly will be crammed into the same space.

A Year Goes By
It was during the same September show in 2008 that the Lehman Brothers debacle occurred, throwing the world into the worst recession since the 1930s. Now, exactly one year later, the barrage of encouraging reports that the world is coming out of the recession lifted the spirit of the show. Still, business is a far cry from what it used to be and the actual improvement remains very intangible.

It seems that exhibitors, upon learning that many of their clients would be coming to this year’s show, went on a buying frenzy to fill their inventory display at the show, leading to an increase in the prices of polished diamonds in the cutting centers.  

As in the past few years, Indian diamantaires were the main stalwarts of the diamond shows, and all flights from India were booked solid. This led exhibitors to believe that business with the Indians would definitely be better in this year’s show.

The Upper Hand
However, apart from the Indian market, which has been experiencing an upsurge in demand, other buyers from the region did not report any improvement in their markets.  In addition, after months of being kings of the hill and buying diamonds at cutthroat prices, buyers appeared surprised to find that suppliers at the show were not prepared to entertain their low offers.  

If one takes into account the weakness of the U.S. dollar and how much gold has risen in the past month alone, it is inevitable that diamonds will have to find higher levels to maintain their value. Either that or diamonds will have to be priced in another currency, but the question then arises, which currency?

If the U.S. dollar does fall, as many pundits predict, then will the other world currencies be unscathed by this? It became apparent just a few months ago that if the U.S. sneezes, the whole world catches a cold. So if a movement into a hard currency or its equivalent is right now the main focus of the entire world, the question might be raised: What can be harder than diamonds?

What’s in Demand?
While there is still a substantial amount of inventory in the pipeline, it has become increasingly difficult to buy the narrow range of qualities in demand. It seems ironic that anytime there is strong demand for a particular range of goods, those goods seem to have vanished from the production lines.

Demand is strong for large stones in low to medium colors in higher clarities, but the main hurdle is whether buyers and sellers can reach a compromise on prices. Some buyers came to the show assuming that if they had the capacity to buy in large volumes, they would be able to squeeze suppliers on prices. But most suppliers this time were more inclined to hold on to their goods unless they could see a profit.

At the moment, there seems to be a 5 to 10 percent gap between the manufacturing centers and the Hong Kong market, as well as surrounding countries. As usual, it will take at least a few weeks until the pattern is clearer as to whether prices are indeed on the rise and whether demand will pick up substantially for the Christmas season.

What has been most interesting in the past few months, as the whole world was mired in worries about the economy, was that consumers in the region were trying out diamonds in both lower colors and clarities, expanding the range of goods that are salable.

The Marketplace
  • Large stones from 3 carats+, in both rounds and fancies, are still in demand. High colors of D-E in SI or anything from G-M colors in both VVS and SI are moving well.
  • 6-grainers and caraters enjoy steady demand. The cut grade range has broadened, but the main focus still is on either triple EX or lower makes with correspondingly large discounts.
  • Dossiers from 0.40 and larger are moving well. There appears to be a glut of 0.30, but they are moving reasonably well if priced competitively.
  • The demand for clean H-J, VVS in 1/10-1/4 for the Chinese market is still strong.

Article from the Rapaport Magazine - October 2009. To subscribe click here.

Comment Comment Email Email Print Print Facebook Facebook Twitter Twitter Share Share
Comments: (0)  Add comment Add Comment
Arrange Comments Last to First