Lessons from Hong Kong

Avi Krawitz

The Hong Kong Jewellery and Gem Fair that took place this week reassured the diamond trade that things are not quite as bad as they seem. There were a high number of visitors at the show and buyers were looking at goods even if sales were mediocre.

Overall, the show was better than expected. Mind you, expectations within the diamond trade were relatively low. The market has been fairly weak in the past few months and polished prices softened in the run up to the show. Furthermore, there has been underlying uncertainty about the market in China as economic growth has slowed and jewelry sales have slumped compared to last year’s gold-driven highs.

Therefore, while there was still a steady flow of visitors at press time at the end of the fourth day of the show, the mood remained positive on the trading floor. At least there was interest in the market.

However, buyers were looking for specific items to fill existing orders and avoided making large inventory purchases. As one New York-based supplier told Rapaport News, “People are here but I’m waiting for someone to go boom boom boom and fill a large order. That hasn’t happened and I don’t understand why.

hong-kong-jewelery-gem-fairThe market is not booming. On average, there was a slight softening of prices at the show, largely as manufacturers sought to raise liquidity levels. Those who lowered their prices were able to sell off some inventory. In addition, the busy traffic provided hope that there might be a strong follow up after the show. Significantly, after the quiet trading in July and August, the September Hong Kong show at least signaled for many that the long summer is finally over.

A number of strong themes emerged about the market from the past week spent in Hong Kong. Here are a few things that Rapaport News learned at the show:

1. Liquidity is, indeed, tight.

The lack of liquidity in the midstream has caused a degree of panic among manufacturers and dealers. A number of factors have caused the liquidity crunch: primarily, third quarter polished sales have been slow so far; cash flow from polished sales have been delayed by the long turnaround time at the Gemological Institute of America (GIA); margins are tight as rough prices have remained relatively firm since April – with some softening in recent weeks – while polished prices have declined; and finally, the banks have reduced their credit to the industry.

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Source Rapaport