Rapaport Magazine

Hong Kong

By Mary Kavanagh
Business Slow, Customers Bargain More

The diamond business in Hong Kong was slow over the summer months as retail sales continued to drop and the government lowered its economic growth forecast for the year. “Sentiment is weak and customers are bargaining more than before,” said Kenneth Cheung, Edelweiss Jewellery Company Ltd. “The anticorruption policy in China and credit crunch in the property market continue to negatively impact sales of high-end jewelry and large diamonds,” he said. “The war between Ukraine and Russia, Israel and Hamas, and the Ebola virus also have a negative impact on business. One of my suppliers who lives in Israel told me that rockets are flying over his head and he has lost all interest in business.”
   A spokesperson for Bee’s Diamonds also reported that business has been “quiet and tough,” with most customers looking for good-quality diamonds at a low price. “The major factor affecting the mood is the drop in the Rapaport List prices for polished diamonds,” he said, noting that people in the trade are hopeful that prices will increase soon as this would have a positive impact on the industry.

Hopes for September Show
   Optimism prevails for the upcoming Hong Kong Jewellery & Gem Fair, scheduled for September 15 to 21, after press time. “The September show will be very important for the market,” Cheung said. “It is like seeing a lighthouse in a foggy sea. It is an important forum for us to get feedback from customers on our products and new developments for the coming season.”
   The show boasts the world’s largest Diamond Pavilion with more than 400 diamond exhibitors. They include diamond companies under the banner of the Antwerp World Diamond Centre (AWDC) and the Israel Diamond Institute Group of Companies (IDI), as well as individual exhibitors from India, Thailand and the United States.
   “The September show has been recognized as the must-attend jewelry sourcing platform by global jewelers, including diamond traders,” said Celine Lau, director of jewellery fairs for UBM Asia Ltd., the show organizer. “The show is important for the diamond trade to get new orders and consolidate their business contacts. We have a full house yet again in the Diamond Pavilion, with a waiting list,” she said, adding that more than 3,600 exhibitors have signed up and around 52,000 visitors from around the world are expected to attend.
   “Sixty-eight percent of visitors in 2012 came from outside Hong Kong. In 2013, that number was 69 percent,” Lau said. Also in 2013, the number of visitors from Asia Pacific — excluding Hong Kong — increased by 6.7 percent over the previous year to 28,512, accounting for around 54 percent of total visitors. The number of attendees from Europe, North America, the Middle East, Africa, South and Central America was roughly the same as in 2012.
   “These figures not only confirm the rosy jewelry markets in Asia Pacific, but also the stability of various jewelry markets outside the region,” Lau said, noting the largest increase in visitor numbers at the September 2013 show came from China, India, Vietnam, Malaysia and Myanmar.
   Poly Auction (Hong Kong) Ltd. will host a number of preview sessions for its autumn auction to coincide with the show. “More than 200 diamonds, important colored gemstones, world-famous antiques, signed jewelry and popular jadeite items will go under the hammer at the autumn show in early October,” according to a spokesperson for the company.

Retail Sales Continue Slide
   Retail sales fell in July for the sixth consecutive month. Total retail sales declined by 3.1 percent year on year, an improvement over June, when monthly sales dropped 6.9 percent. Economists specifically cited the negative impact on the market of the continued plunge in demand for luxury goods. Jewelry sales decreased 22.2 percent in July after a June decline of 28.2 percent.
   Earlier, the Hong Kong Retail Management Association (HKRMA) announced the January through June period was the worst first half since 2009. The association attributed the “below expectations” sales to unstable weather, sluggish growth in Mainland visits and spending, and the World Cup in Brazil distracting people from their shopping, South China Morning Post reported. HKRMA predicted overall retail sales performance of 3 percent in 2014, depending on whether the declines are reversed and mid-single-digit growth is achieved in the remaining months.

Growth Forecast Cut
   The government cut its economic growth forecast for the year to 2 percent to 3 percent, down from its earlier prediction of 3 percent to 4 percent, following a contraction of the economy in the second quarter. Real gross domestic product (GDP) increased by 1.8 percent year on year, down from 2.6 percent in the first quarter and lower than market expectations of 2.4 percent.
   Real GDP fell one-tenth of 1 percent in the second quarter from the previous quarter, the slowest growth since the third quarter of 2012. The poor performance was driven by a decrease in visitor spending and weak domestic demand. However, the Hong Kong stock and property markets have experienced an upturn. The Hang Seng Index broke the 25,000-point barrier for the first time and also closed at its highest level since May 2008.

Article from the Rapaport Magazine - September 2014. To subscribe click here.

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