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Four Trends from a Tough Year for Stocks

Jan 2, 2019 5:19 AM   By Joshua Freedman
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RAPAPORT... Diamond-related shares mainly fell in 2018, in line with a global stock-market downturn. Investors fretted about trade tensions, uncertain consumer demand and the impact of the US Federal Reserve raising interest rates in December. The S&P 500 index ended the year more than 6% down, while Hong Kong’s Hang Seng slid 14%.

It wasn’t all bad: Some diamond miners did well, while retail offered a few exceptions to the rule. Here were the main takeaways from the year in stocks (see full table below):

1. US retailers slumped.

Growing competition from e-commerce players, and shaky outlooks for American consumer spending, made it a difficult time for brick-and-mortar chains. Signet fell 44% in 2018, with the bulk of its losses coming in December following disappointing third-quarter earnings and a wider Wall Street rout in the final weeks of the year. Macy’s (+15%) bucked the trend as it reported good financial results.

2. The trade war hit nearly everyone.

The US-China tariff dispute, and the resultant depreciation in the Chinese yuan, dented Hong Kong jewelry stocks, with Chow Sang Sang (-38%) leading the declines. Tiffany & Co. (-23%) also suffered, as the currency devaluation dampened Chinese tourists’ spending power abroad.

European luxury stocks generally dropped due to the same trade concerns, as well as nerves over Brexit and the state of the eurozone economy, with the region’s Euro Stoxx 50 index down about 15%. Disappointing profit figures and a buyback of watches knocked Cartier owner Richemont from its peak in mid-May, and the stock continued to fall to a full-year decline of 29%. Swatch Group slid 28%. Pandora slumped in mid-May after weak Chinese sales, and never recovered, recording a 61% decrease for the year.

Gucci owner Kering (+13%) outperformed the European market after experiencing positive sales across its brands, for which jewelry is a relatively small element.

3. Big diamonds meant big money.

Gem Diamonds (+54%) was the best-performing diamond miner, with a record year for large-stone discoveries at its Letšeng mine boosting financial results.

However, weakness in the small-stone market hammered miners such as Stornoway Diamond Corporation (-69%) and Firestone Diamonds (-66%).

As for other producers, Alrosa (+31%) pleased the markets with its strong profits, boosted by an overall improvement in Russian equities in 2018 amid hopes of improved relations with the US.

Diversified miners had a reasonable year, with De Beers owner Anglo American up 12%. Stock performances in that sector are mainly driven by factors such as metal prices.

4. It can’t get much worse than Gitanjali.

India’s Gitanjali Gems (-99%) lost almost all its value after its owner, Mehul Choksi, was accused of a massive bank fraud. That episode, combined with a sluggish Indian economy and the devaluation of the rupee, had a wider impact on Mumbai equities, with PC Jeweller (-82%) and Asian Star (-43%) also losing significant ground.

Even so, the Bombay Stock Exchange’s Sensex index was up 6% for the year. Titan Company (+9%) outperformed that, as it’s one of the more organized jewelers that’s gaining market share while weaker rivals fall behind.

  December 31, 2018 (close) January 2, 2018 (open) Chng. Chng. 
Stock Indexes      
BSE 36,068.33 33,913.55 2,154.78 6.4%
Dow Jones 23,327.46 24,809.35 -1,481.89 -6.0%
FTSE 6,728.13 7,687.80 -959.67 -12.5%
Hang Seng 25,845.70 30,028.29 -4,182.59 -13.9%
S&P 500 2,506.85 2,683.73 -176.88 -6.6%
         
USA        
Birks Group $0.95 $1.36 -$0.41 -30.1%
JCPenney $1.04 $3.25 -$2.21 -68.0%
Macy’s $29.78 $25.81 $3.97 15.4%
Signet $31.77 $56.74 -$24.97 -44.0%
Tiffany $80.51 $104.57 -$24.06 -23.0%
Walmart $93.15 $99.30 -$6.15 -6.2%
         
Far East        
Chow Sang Sang (HKD) 11.62 18.86 -7.24 -38.4%
Chow Tai Fook (HKD) 6.53 8.14 -1.61 -19.8%
Luk Fook (HKD) 22.35 33.50 -11.15 -33.3%
Sarine (SGD) 0.46 1.02 -0.57 -55.4%
         
Europe        
LVMH €258.20 €245.65 €12.55 5.1%
Kering €411.60 €364.34 €47.26 13.0%
Richemont* CHF 63.00 CHF 88.40 -€25.40 -28.7%
Swatch Group* CHF 286.70 CHF 397.10 -€110.40 -27.8%
Pandora DKK 265.30 DKK 680.00 -€414.70 -61.0%
         
INDIA (rupee)        
Asian Star 738.00 1,300.00 -562.00 -43.2%
Gitanjali Gems 1.03 72.00 -70.97 -98.6%
PC Jeweller  86.15 468.20 -382.05 -81.6%
Titan 929.95 855.00 74.95 8.8%
         
AUSTRALIA        
Michael Hill AUD 0.62 AUD 1.23 -AUD 0.61 -49.6%
         
MINING STOCKS        
Alrosa* RUB 98.62 RUB 75.21 RUB 23.41 31.1%
Lucapa Diamond AUD 0.21 AUD 0.23 -CAD 0.02 -8.9%
Lucara Diamond CAD 1.48 CAD 2.82 -CAD 1.34 -47.5%
Mountain Province CAD 1.95 CAD 3.33 -CAD 1.38 -41.4%
Stornoway Diamond CAD 0.20 CAD 0.65 -CAD 0.45 -69.2%
UK (pence)        
Anglo American 1,747.80 1,559.00 188.8 12.1%
Firestone Diamonds 3.33 9.80 -6.5 -66.1%
Gem Diamonds 111.00 72.00 39.0 54.2%
Petra Diamonds 37.68 65.99 -28.3 -42.9%
Rio Tinto 3,730.00 3,943.50 -213.5 -5.4%
*Starting price for stocks with asterisk was at market opening on Jan. 3, 2018.

Image: Stock-market quotes. (Shutterstock)
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