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Hong Kong Show Reflects Slow Chinese Demand

Sep 24, 2019 5:03 AM   By Joshua Freedman
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RAPAPORT... The timing of the September Hong Kong Jewellery & Gem Fair was unfortunate, coming amid a wave of anti-government demonstrations in the city. But for many participants, the political tensions were masking the bigger issue: Chinese demand has slowed, compounding the wider problems in the diamond industry.

“The protests are an excuse [for not attending], but really the market is not good,” said the director of a large Indian diamond manufacturer on condition of anonymity.

The trade war, the depreciation of the Chinese yuan currency, and high gold prices have reduced the buying power of companies and consumers in the country, exhibitors noted at the fair, which ended Sunday. Trade customers are mostly unwilling to buy for stock or make advance bulk orders, as they want to keep their inventory down. Some Chinese jewelers believe they can get better deals if they wait for polished prices to fall further.

“Retailers have a lot of polished goods that haven’t been sold,” a Hong Kong-based supplier noted at the show last week. “They were buying at a consistent pace, but the consumption level has gone down. They used to buy bigger parcels for the long term, but now they’re working three months at a time.” That change has occurred since May, he added.

Shift to lower qualities

Consumers are seeking cheaper jewelry items, observed Lawrence Ma, president of the Diamond Federation of Hong Kong, China. “The market has adjusted to a level that represents the [current] supply and demand,” he explained.

On a positive note, growing interest in those lower-priced items — such as 0.30- to 0.50-carat diamonds with SI clarity — could boost the trade as shortages start appearing, he added.

“Commercial goods have become very popular in China,” Ma said. “In the last two to three months, the supply of rough has decreased, which is a healthy sign. We’re already seeing certain sizes and qualities of goods might be in demand. We might find we do not have enough of these goods.”

Lower footfall, slower sales

Sales at the show were focused on commercial goods, with stable demand for 1- to 1.50-carat, G to I, VS2 to SI2 diamonds. The market for 0.30- and 0.40-carat stones was weak, but showed signs of stabilizing. Demand for diamonds weighing 3 carats and higher was sluggish, especially in better colors.

Fewer exhibitors and buyers came because of the protests and the market weakness. Trading and traffic were slow, with suppliers observing a drop in the number of Chinese clients attending. But the event still exceeded many exhibitors’ extremely low expectations, as the buyers who turned up were serious ones.

“The show has been better than expected for us, because we didn’t expect many people to come,” said Chetan Shah of R A Gem Centre, the Hong Kong unit of Indian manufacturer S. Vinodkumar Diamonds. “Whoever [came to our booth] were people who really wanted to buy diamonds. They were looking for goods at an attractive price, and if we have the goods, they will buy.”

Sensing an improvement

While buyers were mainly cautious, a minority of exhibitors said clients were aiming to take advantage of the relatively low polished prices to stock up on merchandise.

“People have come to find cheap goods because prices are down,” said Aashay Bhansali, a trader at Antwerp-based diamond supplier Veera Dimon. “Prices have fallen so much, and they don’t think there will be another price fall.”

Diamantaires expressed some optimism that the upcoming holidays would boost Chinese demand, beginning with Golden Week, which starts October 1. Retailers have slowly been working down their inventories by reducing purchases, and will soon be ready to buy again, another Antwerp-based company executive predicted. Golden Week, Christmas and Chinese New Year all offer opportunities for local diamond sales, he noted.

“They haven’t bought much over the last few months, so I’m sure demand will come back,” he explained. “They can’t keep on like that.”

Preparing for the future of trade showsAmid the sluggish market, companies are rethinking how they approach the expensive business of trade shows.

Most exhibitors who spoke to Rapaport News intended to return to the Hong Kong fairs next year. They hold the event in high regard compared with some of the other items on the trade-show calendar. It presents fewer visa issues than JCK Las Vegas, is more affordable than Baselworld, and takes place in one of the world’s most open trading hubs.

“Hong Kong is a…center and a feeding point for the whole Far East,” said Michel Klein of SDI, a New York-based polished supplier. “There are lots of countries [in the region] where you can’t bring [goods] in because of taxes. Hong Kong is always a show of surprises, which you don’t have in the States. There are people from literally every place.”

Informa will rebrand next year’s show as Jewellery & Gem World Hong Kong, reflecting the international appeal. The event is scheduled to run from September 13 to 17 at the AsiaWorld-Expo, and from September 15 to 19 at the Hong Kong Convention & Exhibition Centre.

However, exhibitors still questioned whether the show was as effective for them as it had been in the past, because buyers can carry out research online and make purchases without meeting the seller in person.

“Shows are not what they used to be,” said a director of an Antwerp-based company exhibiting in the diamond hall’s Belgian pavilion. “The show formula has to reinvent itself, but I haven’t found a way to do it yet.”

Image: The Belgian diamond pavilion at the Hong Kong show. (Informa Markets)
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Tags: Aashay Bhansali, Antwerp, asia, AsiaWorld-Expo, Baselworld, Chetan Shah, China, Chinese demand, Chinese New Year, christmas, Diamond Federation of Hong Kong, Far East, Golden Week, Hong Kong, Hong Kong Convention & Exhibition Centre, Hong Kong Jewellery & Gem Fair, JCK Las Vegas, Jewellery & Gem World Hong Kong, Joshua Freedman, Lawrence Ma, Michel Klein, R A Gem Centre, Rapaport News, S. Vinodkumar Diamonds, SDI, Veera Dimon, Yuan
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