Rapaport Magazine

Hong Kong

By Mary Kavanagh
Quiet Times

The June Hong Kong Jewellery and Gem Fair, which marked its 28th anniversary this year, was the largest ever in the fair’s history. It boasted a record number of exhibitors — 2,286 from 45 countries and regions — increased exhibition space and a broader product offering. “The number of exhibitors was up 20 percent compared to last year,” said Celine Lau, director of jewellery fairs at UBM Asia Ltd., the fair organizer. Even though the fair attracted around 25,000 buyers from around the world, overall visitor numbers were down 5 percent compared to last year. Visitors from Mainland China accounted for 37 percent of the total, with India, Taiwan, the Philippines, Thailand, Japan, the U.S., Singapore, Korea, Australia and Indonesia also well represented. “The MERS (Middle East Respiratory Syndrome) virus outbreak in Korea negatively impacted the number of visitors from there,” Lau said. She also noted that there were fewer buyers from the Middle East and Russia because of the economic climate in those regions.
   “Despite the reported slowdown in China’s economy, China remains the major driver of global fine jewelry consumption,” said Jimé Essink, president and chief executive officer (CEO) UBM Asia Ltd. He pointed out that in April 2015, retail sales of gold and silver jewelry in China totaled $36 billion, which was up 10 percent compared to 2014. “Our outlook for the jewelry industry for the rest of 2015 is optimistic,” he added. UBM Asia expanded its fine jewelry and gemstones sections for 2015 and also featured new attractions, such as a stainless steel jewelry pavilion, a fashion jewelry pavilion and a designer area, all “aimed at providing our participants a wider range of choices,” Essink said. Feedback from buyers on the expanded range of products and the international profile of exhibitors was positive according to Lau.

A Quiet Show
   Although the general consensus among exhibitors was that the June show is typically not as busy as those held in March or September, general feedback was that this was “quieter than expected,” “a quiet show,” “so-so” and “okay.” A spokesperson for Edelweiss Jewelry, a Hong Kong–based jewelry manufacturer who exports predominantly to the U.S., said that gem-set jewelry and colored stones such as rubies, sapphires and emeralds were more popular than diamonds at the fair. According to Lau, “the buying mood has not been good since the beginning of the year and we observed that buyers remained conservative in terms of purchasing.”

Chow Tai Fook Sales Down
   Chow Tai Fook (CTF), the world’s largest listed jewelry chain by sales, reported a decline of 6 percent in retail sales in the fiscal first quarter of 2015, which ran from April 1 to June 31. Same-store sales declined 15 percent year on year, which the company attributed to weaker consumer demand in Hong Kong and Macau, where same-store sales were down 24 percent. Same-store sales fell by 7 percent in Mainland China. According to Bloomberg Intelligence retail analyst, Catherine Lim, the jeweler cut prices for some of its diamond-set products by as much as 30 percent in June in a bid to reduce inventories bloated by weaker-than-expected sales in Hong Kong.

Slower Sales Drop in May
T   otal retail sales in May continued to decline, although at a decreased rate compared to April. Sales were down 0.1 percent in value compared to 2.1 percent for April, while sales volume in May was up 4.6 percent compared to a growth of 2.5 percent in April. “The total retail sales performance for the first five months of 2015 is still dragged by the significant drop in sales of jewelry, watches and clocks and valuable gifts — 16.8 percent,” the Hong Kong Retail Management Association (HKRMA) said in a statement. Although the category also recorded a double-digit decline of 14.9 percent in May, this was an improvement from the 19.5 percent drop seen in April.
   According to a research note from Barclays Investment Bank, “although the data for May was encouraging, we continue to expect slow long-term growth trends for Hong Kong over the next few years since we expect higher-spending visitors to continue to shift to other travel destinations, particularly destinations with depreciated currencies. We believe Hong Kong’s product pricing advantage could also diminish if the U.S. dollar is strong and if China at some point removes more import tariffs or consumption taxes for more goods in China.”
   One factor that may be contributing to the slower growth is that Mainland tourists are increasingly opting for destinations other than Hong Kong. Overall, visitors to the city in June dropped for the second month this year, recording a decline of 2.9 percent year on year. Mainland visitors are traveling more and more to other countries such as Japan, Vietnam and South Korea, all of whom reported a significant increase in tourists from Mainland China. According to a study by HSBC Global Research, Hong Kong will lose out from the emergence of a “new TST” — Tokyo-Seoul-Taipei — attracting visitors as opposed to Tsim Sha Tsui, the popular shopping district in Kowloon.

Article from the Rapaport Magazine - August 2015. To subscribe click here.

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