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U.S. Economic Concerns Take Their Toll at IIJS

Aug 5, 2011 8:35 AM   By Avi Krawitz, Dilipp S. Nag
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RAPAPORT... Polished diamond buyers remained cautious on the second day of the India International Jewellery Show (IIJS) as concerns about the global economy kept trading subdued. Visitor traffic was strong on Friday, but exhibitors reported that buyers were resisting polished sellers' asking prices.  
 
''Global economic news out of the U.S. and Europe has led to confusion in the market so people are not sure if prices are sustainable and if there will be a double dip in the market,'' said Ankit Shah, a partner at Ankit Gems, a manufacturer of rounds, princess and cushion-shape diamonds. ''So confidence is a bit down and people are not sure whether to stock-up for the season now or to wait and see if prices will come down.''
 
Trends on the financial markets this week didn’t help confidence as the Bombay Stock Exchange Sensitive Index (Sensex) fell more than 2 percent on Friday after the Dow Jones lost more than 500 points on Thursday, marking its worst daily decline in two and a half years.
 
''The mood is not so good and people are a bit nervous,'' said Alain Spira, president and founder of New York-based A.S. Diamonds, which specializes in 1-carat to 30-carat, D-M, SI+ stones with Triple-X cuts. ''There are not serious buyers and the offers are generally lower than what we want.''
 
Shah agreed and noted that this show's first two days have not been as strong as the beginning of IIJS 2010. ''The serious buyers came on the first two days of the show last year to avoid the weekend crowds; we haven’t seen that this year.''
 
Sandeep Shah, a director at C. Mahendra Exports Ltd., a manufacturer of all size diamonds and jewelry, agreed that sentiment in the market has been a bit weak, which has brought some price resistance from buyers. He noted that the market was slow prior to the show as it traditionally is during the summer, but also because liquidity has become tight in India.
 
Sandeep Shah explained that the low liquidity in the market came as inventories have grown so that liquidity is held in goods rather than cash, thus prohibiting businesses to raise their buying levels.
 
Ankit Shah added that while banks have become tighter in their lending, liquidity has also reduced as high prices have led to higher manufacturing costs. “Prices have gone up so it costs more to manufacture the same volumes,” he said.
 
Some cautioned that the lack of liquidity could still impact prices at the show. Spira noted that Indian sellers appear very eager to sell and prepared to compromise on price.
 
Ankit Shah added that diamond cutters made money in the first half of the year and therefore may be willing to lower their prices in order to stay in the business cycle for now.
 
''My hope that the market will remain stable so that there will be more confidence to trade after the show,'' Ankit said. ''That will happen if manufacturers don’t crash the market by selling too cheap.
 
''But I don’t see any sign of them doing that,'' he added.
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Tags: Avi Krawitz, Dilipp S. Nag, concern, diamonds, economic, global, IIJS, Jewelry, worries
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