Rapaport Magazine

Hong Kong

By Mary Kavanagh
Short Cycles, Quick Changes

The diamond market in Hong Kong was “quiet and weak with not much trading activity” in the first quarter to the end of June, according to an executive committee member of the Diamond Federation of Hong Kong. This sentiment was shared by a wholesaler who noted that even though July is traditionally a quiet time, it felt as though summer had come early this year, with the market “taking a vacation” beginning in mid-May. “A month ago, it felt like we were in July already,” he said. The wholesaler, who spoke on condition of anonymity, said he expects the market to pick up in August. “Here, the market can go quiet very quickly, but it can also restart very quickly. The cycles are very short.”

Good Times for Chow Tai Fook
   Hong Kong jewelry retailer Chow Tai Fook made the top 20 list of the “most sought-after luxury brands” on the Mainland in the latest “World Luxury Index China 2013” survey. The company was the highest-ranked jewelry company in the listing, in 17th place, in the report released at the end of June by New York–based market research firm Digital Luxury Group. That placed the retailer ahead of French jeweler Cartier and Austrian firm Swarovski in the listing.
   Chow Tai Fook’s popularity among Mainland buyers is also evident in the company’s first-quarter results for 2013/2014 released in early July, which the company described as “remarkable.” Overall revenue growth for the quarter was 63 percent, with sales in China up 45 percent year to year and sales in Hong Kong and Macau up 85 percent over the same time period. It was the largest quarterly increase since the retailer went public in December 2011. Company spokesmen admitted the sales growth was boosted by the huge demand for gold products after the decline in bullion prices in April.
   “We saw signs of recovery in the mass luxury jewelry market in Hong Kong, while in the Mainland of China, the continued economic growth and emergence of a fast-growing middle class and high-net-worth population is favorable to the jewelry market in the medium to long run,” said Kent Wong, managing director of Chow Tai Fook Jewellery.
   Wong said he expects the price of diamonds to increase steadily because of this growing demand and the lack of supply. “We have secured our sourcing capability through long-term partnerships with the world’s three largest diamond miners: De Beers Diamond Trading Company (DTC), Rio Tinto and ALROSA,” he said.
   The company opened 20 new retail outlets in the first quarter to meet the rise in consumer demand, 17 in China and three in Hong Kong and Macau, bringing the total number of stores in these locations to 1,856 at the end of June 2013. Online sales are also doing very well and tripled in the past year, Wong said. “We will continue to step up our online platforms, including the CTF e-shop, Tmall and 360Buy to promote jewelry sales online and meet demand among the younger generations.”

Trend To Smaller and Color
   There has been an increase in the popularity of smaller diamonds and semiprecious stones at affordable prices, Wong said. “These appeal to young customers who are looking for mass luxury, fashion gem-set jewelry for daily wear and festive celebrations,” he said, pointing out that Chow Tai Fook has “enhanced our product offerings” in those categories to meet the rising demand.
   The wholesaler who spoke on condition of anonymity said “fancy color diamonds have been one of the major trends in the past two years,” a trend he sees continuing. He noted that Chinese consumers have started to buy carat-size diamonds in fancy colors and this was never the case in the past. “In China, people used to buy only brilliant cut diamonds five to six years ago, and now they buy fancy shapes and fancy colors. It is a big market with a very wide range of goods being sold,” he said. 
  But he cautioned that Hong Kong clients often have very specific, uncompromising demands. “It is very difficult if a client is looking for 10 carats — you can’t sell him a 9 carat. If a client wants D/E color, you are not going to be able to sell him an F. ”

Protest March
   The July 1 Hong Kong handover holiday, marking the anniversary of Hong Kong being “handed over” to China by the U.K., gave some people reason to celebrate and others to protest. This year marked 16 years since the handover and the one-year anniversary of Chief Executive CY Leung’s inauguration. Thousands — estimates ranged from 100,000 to more than 400,000 — took to the streets “braving heavy rain to demand universal suffrage and the resignation of Leung,” the South China Morning Post reported, referring to the day as “one of the most polarized and divided handover anniversaries in the past decade.” The government responded to the protest march by releasing a statement, saying that it “fully respects” freedom of expression and will “listen to marchers’ views in a humble manner,” and that it plans to “implement universal suffrage for the chief executive election in 2017” in accordance with current law, the paper reported.

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

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