Rapaport Magazine

Hong Kong

By Liana Cafolla
Saber Rattling, Bird Flu Unsettle Market

Diamond business in Hong Kong was slow and subdued in April, with the market preoccupied with much bigger political, social and health issues that have the potential to cause major disruptions in trade, traffic and tourism. Among the headlines of greatest concern are the North Korean threat, the bird flu outbreak and a still-stagnant world economy.
   Raymond Ng, director of Yokee Hong Diamonds Jewellery Ltd., said the potential return of a bird-flu virus is the biggest worry to the diamond and jewelry business in Hong Kong. “That would affect the market more than the threat of North Korea,” he said.
   Ng said there was a shortage of rough diamonds in the market, but there was little scramble to locate supplies, which was less of a concern because, at the same time, demand was slowing. “Overall, the Hong Kong market is not so good” at present, said Ng. “Whenever the world economy is not so good, the impact hits us very fast.”
   Prices for small diamonds in India have risen on increased demand from China, according to the South China Morning Post. “Prices of polished small diamonds in 6- point to 10-point sizes have gone up by 5 percent. The rise reflects increased demand for these categories in China, Hong Kong and other Asia Pacific regions,” said Vipul Shah, chairman of India’s Gem and Jewellery Export Promotion Council (GJEPC).

Bird Flu H7N9
   As of April 16, China counted 14 dead and 63 confirmed cases from the new bird flu strain, H7N9. Cases were reported in Shanghai, Beijing and four provinces, including Henan, the most populous province. All the dead had been infected by direct contact with chickens, and no human-to-human contact had been reported. There is no known remedy for H7N9, and a Hong Kong expert has warned that the new strain is particularly dangerous.
   Ho Pak-leung, a microbiologist at the University of Hong Kong, said the new virus showed a higher ability to be transmitted rapidly from birds to humans and to spread geographically than an earlier deadly strain, H5N1, reported the South China Morning Post. He said the pattern of infections so far pointed to “one alarming conclusion — it may be a bigger health threat that H5N1.”
   Hong Kong people remember only too well the devastation wreaked on the city ten years ago, when the H5N1 virus left 332 dead worldwide and the Hong Kong economy ravaged. A decade ago, most of the city’s expatriate population left, restaurants closed by the dozens, the property market sagged and the city narrowly averted the decision to become a closed port. This time, the stakes could be even higher, as the number of visitors from Mainland China has multiplied in the intervening decade, making the possibility of cross-border infection much higher.

Counting on Tourists
   As a popular shopping destination, Hong Kong’s economy is heavily dependent on the millions of visitors who stream into the region from Mainland China, as well as other countries, to spend their money on hotels, restaurants and luxury goods such as jewelry. It is not unusual for as many as one million Mainland Chinese to cross the border into Hong Kong on major Chinese holidays to do some serious shopping.
   Anything that disrupts political stability or makes people fearful of traveling will have serious repercussions on the diamond industry and the jewelry retailers who rely on tourist spending. That is why the North Korea situation is so worrisome to them.
   North Korea’s belligerence is not new — it has made several seemingly unprovoked shows of might and defiance in recent months. But the ratcheting up of its nuclear missile attack threats not only to South Korea, with whom it is still technically at war, but also to the U.S., and its seeming reluctance to desist even at the behest of China, its only ally, are reasons for disquiet.

A Growing Taste for the Past
   While the focus in Hong Kong has always been on modern jewelry, there has been a moderate increase in demand for estate jewels in recent years, according to Graeme Thompson, head of the jewelry department for Hong Kong and Asia at Bonhams.
   “Although the shift has not been dramatic, we are definitely seeing more focus on period jewelry, particularly by important houses such as Cartier, Van Cleef & Arpels and Tiffany & Co.,” Thompson said. “Period jewelry tends to appeal to buyers when the jewel is signed and brands that have heritage and a story tend to be the most appealing.”
   One such piece is the headline attraction in Bonhams next jewelry sale, scheduled for May 25 in Hong Kong. A circa 1925 Art Deco ruby and diamond necklace by Cartier, it carries a presale estimate of $390,000 to $520,000. The necklace is one of approximately 200 jewelry lots on offer for the auction.
   The growing taste for estate jewelry is a sign of a maturing market, according to Thompson. Buyers are attracted by the stories and heritage that often accompany old European jewels, as well as by their links to the rich and powerful.

Article from the Rapaport Magazine - May 2013. To subscribe click here.

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