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Hong Kong
By Mary Kavanagh
“In general, I am optimistic,” said Lawrence Ma, founding president and chairman of the Diamond Federation of Hong Kong, speaking about the diamond business conducted in the city at the international jewelry show in March. “Local consumption is not bad. We basically have full employment and the retail business is not doing badly.” Ma made the comments in a wide-ranging exclusive interview with Rapaport Magazine conducted on the floor of the Hong Kong show. He pointed out that industry performance differs depending on which segment of the market you look at. Retail sales continue to be strong, driven largely by demand from Mainland consumers. “With the difference in price levels between Hong Kong and China, the customers will continue to come,” he said, noting that Mainland Chinese consumers have both the urge and the money to buy. The problem, according to Ma, is that they are mostly attracted to the big-name brands, so local companies that do not have the same brand recognition, yet face the same costs as the bigger companies in terms of rent, labor costs and inflation “might suffer.” The wholesale market has improved in recent months as people have started to replenish stock. “Consumption over the Chinese New Year was good, so I expect a better March,” Ma said. But he acknowledged that doesn’t mean business was good for everyone. “It depends which goods you deal in. I think there is less supply of small diamonds than the market wants, such as smaller diamonds that are used in fashionable diamond jewelry items, and the 20-pointers to 4-grainers are doing quite well.” Demand for VVS generally has been weak because consumers and retailers are not prepared to pay 10 percent to 15 percent more for these stones than for VS, but Ma is of the opinion that in time the market for these stones will correct itself. Profit margins for manufacturers and diamond polishers have improved although they are not yet as high as they would like. “Certain sizes and qualities of rough have been going up in price and that has been reflected in the retail demand and the demand for polished goods,” Ma said.
“Between 15 million and 20 million couples get married every year in China and the growing trend is that more and more of these couples will want a diamond ring,” Ma said. “And the demand for gold jewelry will not fade,” he noted, adding that the clampdown by the Chinese government on corruption has not significantly impacted retail jewelry sales. “The 20 percent difference in tax between Hong Kong and China keeps customers crossing the border to buy their jewelry.” Purchasing power in China is strong. “In all our companies in China in 2013, the salary increase was 5 percent to 20 percent. People have more money in their pockets,” Ma said. A spokesperson for Continental Jewellery Manufacturing Ltd., which focuses mainly on nonAsian markets, said “bridal jewelry is strong” and the company sees a trend toward people buying more classic jewelry such as wedding bands, solitaires and tennis bracelets from their current suppliers. “The market has been soft so buyers are keen to work with their existing suppliers. We see closer buyer-supplier relationships than before,” the spokesperson said.
“It is critical for people in the diamond industry who are dealing with natural diamonds to have the capability to distinguish them through their supply channel or their own internal system, so they can screen the products they deliver to their customers to ensure the diamond content is natural,” Ma said. “Synthetic diamonds are here to stay. There will be more of them as time progresses and they will become cheaper.” Ma emphasized that there is nothing wrong with synthetic diamonds so long as they are properly disclosed. “If you sell a synthetic diamond, you must specify that that is what it is. You should not say it is a diamond.” Ma was very positive about the recent installation by the Gemological Institute of America (GIA) of a synthetic diamond detector at the Hong Kong Diamond Bourse. “This will help us offer our members a very convenient and inexpensive way to protect their own integrity and their business,” he said. The bourse has plans to increase awareness among its members of the synthetics coming onto the market and how they can protect themselves. Many smaller companies don’t have such a machine and “can be tricked into acquiring synthetic stones,” he said.
The Hong Kong Trade Development Council (HKTDC) reported that the Export Index for the first quarter of 2014 rebounded sharply from the previous quarter, climbing to 48.1 from 38.5. Nicholas Kwan, director of research at HKTDC, said the index was still below the watershed of 50, indicating that export confidence for the immediate future remained slightly pessimistic. There was an all-around improvement across all products and markets in the first quarter, with the index for the jewelry industry rising from 38 to 48.5.Article from the Rapaport Magazine - April 2014. To subscribe click here.
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