Chinese New Year Spurs Sales

RAPAPORT… Suppliers had virtually written off January after the dismal results of the second annual International Jewellery & Watch Show, in Hong Kong, which ended January 10. But the market did a sudden turnaround during the last three weeks of the month. Demand was quite strong and calls for a wide range of qualities sent retailers scurrying to look for diamonds. Buyers from surrounding markets were also in Hong Kong looking for merchandise.

Unfortunately, the month of February was a very short month as the Chinese New Year fell on February 18 and the market virtually closed down in the middle of the month, only to reopen at the end of February.

Rebound

Hopefully, the market’s reopening will bring a rapid resumption of demand as the Hong Kong International Show is scheduled for March 6 to 10 and some of the exhibitors will be in the mood to buy stones before the show.

The March show, the other large show of the year, has become important in setting the trends for business for the rest of the year. It is expected that more buyers from neighboring countries will be attending the show, especially for diamonds. The 2006 show was excellent and, hopefully, this year will be as good, if not better.

Jewelry workshops in Hong Kong worked overtime to keep up with the demand to finish jewelry before the Chinese New Year holidays. In fact, some were even turning away orders as they could not cope with the amount of work.

The workshop for one of the largest jewelry chains in Hong Kong is reported to have been setting up to ten large-stone solitaire rings a day, which indicates that some of the money made recently in the buoyant stock market did go into diamonds. It also reflects the fact that this company is known to maintain a very large inventory of big and important stones, so when the demand for these arises, the company is one of the few that has them in stock.

Tokens

In Mainland China, the Chinese New Year is also a time when expensive gifts are given as “tokens” of appreciation to officials and it seems that this year the size of the tokens was quite large, in line with the booming conditions prevailing there. Companies with ties in China do very well during the period before the holidays, as large diamonds are frequently the choice for tokens.

In Hong Kong, heart shapes were in strong demand in anticipation of Valentine’s Day. Other fancies are also doing well. The pear shape is the next preferred fancy cut, followed by princess cuts and marquises.

Five-carat diamonds are extremely hot, with demand far outstripping supply, but consumers are very critical of the quality of the stones. The greatest demand is for the very best, especially in the make, with triple EX stones being the most sought after grading. Color and clarity ranges are wide, running from D, IF down to K, SI. In the past, although medium and faint fluorescence would be accepted if a stone with no fluorescence was not available, anything stronger would move only at substantial discounts. Now, even these are selling due to the strong demand for the large stones.

It seems that 1.50- and 2-carat stones are becoming more popular and calls for these are becoming more frequent. While 2 carats may be weak in other markets, it appears that the local Hong Kong market is catching on to the fact that, in recent months, the gap between the 2-caraters and stones of 3 carats plus has increased a lot and the 2-carat stones are becoming more attractive alternatives.

The 1.50-carat stones are popular as pairs for earrings. Oversized carat sizes have lost their luster as demand for 1-carat stones — providing they are slightly more than 1 carat — has become stronger, as retailers look for price points. Buyers don’t like stones that are exactly 1 carat because they fear that if the stone needs to be repaired for any reason, it could fall below the 1-carat size at a great loss in value.

Demand from China continues to be strong, but goods suitable for the market remain in short supply, and prices remain steady.

Some of the smaller jewelry manufacturers in the mainland have recently closed their factories as orders have been very slow, and they are not in a position to deal with the U.S. market, which today is taking very long credit terms and dragging on payments. In addition to this, the small factories have been targeted by thieves, who have mugged staff members bringing finished jewelry to Hong Kong.

The Marketplace

• 5-carat brilliants in a wide range of colors and clarities are in extremely hot demand. Fancies are also sought but are not as popular as rounds. It is difficult to find buyers for larger than 5 carats.
• Demand remains strong for 3 carats, with demand for 2 carats improving and demand for 1 carat steady.
• 0.50 and larger dossiers are in demand; smaller sizes are dull.
• 0.10 to 0.20 carats in H-J colors/VVS-SI enjoy steady demand.