Certification Expected

Hong Kong

By Liana Cafolla

The two most prominent certification providers in Hong Kong — Gemological Institute of America (GIA) and International Gemological Institute (IGI) — both report increasing demand for their services. Among the reasons they cite for the growth in business: greater customer knowledge about diamonds, the tradition of certification in Mainland China, the general economic slowdown and concerns about the appearance of synthetic diamonds in the market.
“Consumers today have gained greater knowledge of the 4Cs of diamond quality, and want assurance they are getting what they are paying for,” said Russell Shor, senior industry analyst at GIA, Hong Kong’s most popular certifier. Hong Kong was one of the first diamond centers to use grading reports in a big way because it is Asia’s largest global trading hub, he explained.
“In addition, diamond grading reports support the Asian custom of price comparison shopping, so demand for diamond grading reports in Hong Kong has grown quickly,” Shor said.

ADDED VALUE OF CERTS

“Globally, certification is increasingly important,” said Marc Brauner, co-chief executive officer (CEO) at IGI Worldwide – International Gemological Institute. “It used to be that only stones of a certain size were certified, but nowadays, we also certify stones that are below 10 points.
   In China, certification is obligatory for all stones 20 points and larger, which encourages Mainland Chinese buyers in Hong Kong to expect certification as a matter of course. Brauner said the difficult economic climate encouraged more certification. “We have seen this time and again: when the economy is slowing down, the trade increases its use of certificates. The number of certificates increases for the simple reason that the seller will provide them because he wants to give buyers an added incentive to buy. Every certificate adds to the per-carat price.
   With 18 labs worldwide — the largest gemological lab in terms of number of laboratories — IGI sets itself apart by offering network grading, facilitated by its global data sharing, and signature reports aimed at exclusive brands. Network grading means that a stone polished in India can be pregraded there, mounted in New York and the certificate issued from New York, describing a stone that was first seen loose in India and mounted in the U.S. That allows IGI “to state that grading and analysis were carried out before and after mounting. That is very important for the consumer,” said Brauner
   Evolving technology has led to more synthetic stones appearing on the market. These are caught during the certification process or occasionally by experienced diamantaires during the buying process, said Brauner. “The rule is you need some sort of guarantee to attest to the fact that these stones were formed and mined in nature, and not grown in a laboratory,” he said. “At a lab like IGI, there are procedures, scientific instruments and extensive know-how that make it rather easy to identify. There is no way that any stone skips the procedures. We have not missed any so far.
   Certification gives confidence and peace of mind to buyers, said Winston Chow, director and deputy general manager of retailer Chow Sang Sang. “Certain aspects of the grading, like cutting, are not as obvious to the consumer, in terms of what is a nice cut, so they really have to rely on the grading,” he said.

ALL SORTS OF STORMS

The start of Hong Kong’s typhoon season has seen the city rocked by strong winds of the traditional kind, as well as economic and political storms blowing from over the border. The gloomy economic forecast was not softened when the CEO of the Hong Kong Monetary Authority noted that about 230 listed firms in Hong Kong have issued profit warnings so far in 2012. Across the border, bad loans in Mainland banks rose for the third consecutive quarter because of defaults by companies struggling in the weaker economic climate. The total of nonperforming loans rose by $2.8 billion, or 4.15 percent, in the April-June quarter to reach a total of $71.8 billion, according to figures from the China Banking Regulatory Commission released on August 15
Foreign direct investment in the Mainland fell by 8.7 percent in July from a year earlier, the biggest drop so far in 2012. Analysts said the weakening would likely continue in view of the troubled global economy.

POLISHED IMPORTS FLAT

Hong Kong’s polished diamond imports fell by less than 1 percent year on year to $8.45 billion in the first half of 2012, according to the Diamond Federation of Hong Kong, China Limited (DFHK). By volume, the imports declined by 29 percent to 10.316 million carats, while the average price on these stones rose 40 percent to $818.77 per carat. The data showed that the volume of imported polished diamonds greater than 1 carat rose 6 percent year on year, while the volume of goods smaller than 1 carat fell 30 percent.