RAPAPORT... Hong Kong is celebrating the fact that China is now officially the second-largest world economy, having surpassed Japan with its second-quarter gross domestic product (GDP) figures. Economists say the superior numbers, coming in an early quarter, bode well for China eventually claiming second place for the year. However, China’s average earnings per capita are still far below other countries. It is the sheer volume of the Chinese market that has catapulted it into second place behind the U.S.
Demand for large stones in DIF continues, as there is a growing number of billionaires in China who only want the very best, be it cars, art or diamonds. Diamonds in D to F in VVS, however, are stagnating, and the main push is for the lower colors and clarities.
Local demand for diamonds slowed dramatically in August, the usual trend for this time of the year. The only market still active is China, as jewelry manufacturers and retailers gear up for the Golden Week holidays in October.
Most in demand are pointers in a wide range of clarities and colors, along with VS and SI, but buyers are looking for certain price ranges that they feel consumers will be more comfortable buying. Even though the economy is slowing, and measures have been put into place by the government to cool the property and equity markets, consumer demand continues to be relatively strong. Consumers may drop their price points but they are still buying.
GIA Comes to HK
One very good piece of news is that finally, after all these years, the Gemological Institute of America (GIA) has announced it will open a laboratory in Hong Kong on September 1. In recent years, GIA operated a Hong Kong office that acted as a take-in window, accepting stones and then sending them to GIA labs in the U.S.
The new Hong Kong lab will issue diamond grading reports and dossiers for diamonds from 0.15 carats to 2.99 carats. It also will provide laser inscription and diamond sealing services. The opening represents a big potential cost savings for Hong Kong diamond dealers, because they will save on shipping and insurance expenses. The turnaround period also should be shortened considerably. However, stones larger than 3 carats, colored diamonds, colored stones and pearls will continue to be shipped to other GIA labs overseas for grading.
GIA will also provide services for grading diamonds locally during the September Hong Kong Jewellery & Gem Fair.
It has been suggested that there is a growing demand for dossiers in lower colors and clarities. Generally, these stones are not certified because the cost of certification makes them too expensive and buyers will not accept the higher prices. But, some industry players feel that a reduction in the charges for certifying these grades would result in more of these stones finding their way into the pipeline to feed the growing demand, especially since these grades are very popular in the Chinese market. Some industry members also have suggested that GIA consider issuing certificates in Chinese, with terms that Chinese consumers can understand.
Prices Creeping Up
Prices have been creeping up even at this time of flagging sales, and buyer resistance is very strong. This is probably due to the fact that the activity at producing centers increases in anticipation of the two very popular jewelry shows, the India show in August and the Hong Kong show in September. Exhibitors usually scramble to buy goods for these shows and prices tend to firm up, while the overall Hong Kong market lags behind.
There is keen anticipation that the September show will be strong this year. At the September 2008 show, the cracks in demand were just starting to show and then came the economic tsunami that lasted for most of 2009. But, at the September 2009 Hong Kong show, there were some indications of an improvement in sentiment and demand, which continued until the first half of 2010. July and August are seasonally slow markets.
Barring any unforeseen developments, the industry is hoping that the remainder of 2010 will at least match the first half.
The Marketplace
• Apart from DIF, the main focus is on high colors in SI for larger stones.
• 3 carats seem to be in short supply, while demand for them continues to be strong. When available, prices for these stones are very firm.
• Activity is normal in carat sizes, but mostly in highly discounted stones or lower colors.
• Demand is strong for 30-pointers and 50-pointers in G-K colors, VS-SI in both certified and uncertified.
• Demand has improved slightly for small Indian setting sizes, but only for specific sizes and qualities.
Article from the Rapaport Magazine - September 2010. To subscribe click here.