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Apr 1, 2013 12:04 AM   By Julius Zheng
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Buying to Beat Price Increases

The Lantern Festival on the fifteenth day of the Chinese New Year of the Snake — February 24 in 2013 — marked the end of the New Year celebration in the traditional sense, although the week-long official holiday only extended February 9 through February 15. This year’s holiday also overlapped Valentine’s Day, popular among the younger generation, adding more sales opportunities.
   According to the National Bureau of Statistics of China, the total retail sales of gold, silver and jewelry in China reached $8.45 billion in the first two months of 2013, increasing by 14.3 percent year on year. Gold jewelry and figurines are always popular purchases during holidays. Diamond retail was stable and many retailers were relieved, even though there was not the large sales increase some might have hoped for.
   With wholesalers reopening for business in full force after the Lantern Festival, trade resumed at a pretty brisk pace, with retailers restocking inventory depleted by holiday sales. There is cautious optimism about the prospects for 2013 and there are even shortages in some of the most popular product categories.

Trade Shows
   The 11th edition of the China International Gold, Jewellery & Gem Fair – Shenzhen, held from February 26 through March 1 at the Shenzhen Convention & Exhibition Center, featured approximately 350 exhibitors from nine countries and regions. Since the Shenzhen fair traditionally has a small presence in loose diamonds, loose diamond buyers from Mainland China attended the much larger Hong Kong International Jewellery Show, organized by the Hong Kong Trade Development Council (HKTDC), from March 5 to 9. The Hong Kong show, now in its thirtieth year and Asia’s largest jewelry show, is considered an important indicator of market and price trends.
   Commenting on record attendance by buyers and record participation by exhibitors, the HKTDC Deputy Executive Director Benjamin Chau said, “The continuing expansion of the middle class and the rapid development of sales channels in emerging markets are fueling consumer demand for luxury goods.”

Diamond Demand
   Diamond exhibitors were in general satisfied with their sales in Hong Kong and were encouraged to see prices going up. “We saw positive momentum at this show, with buyers more confident to place orders now,” said Vishal P. Mehta, president of Dimexon (Hong Kong) Ltd. “So far, buyers from the Chinese Mainland, Hong Kong, Indonesia, Singapore and Thailand have placed orders for our loose diamonds.”
   Prices of polished diamonds continued to rise and deals continued to close after the show, which led attendees to anticipate that there might be further price increases in the future. Although there were signs of market improvement and a lot of market activity at the show, many buyers said they were placing orders only because they were running low on inventory after the Chinese New Year holiday. But some also said they were buying in the expectation that polished prices might increase further, since rough prices have been rising and many buyers are restocking.
   What is not as clear is whether they were buying because they are convinced that consumer demand will significantly improve in 2013. Buyers were somewhat reluctant to get overexcited by the strength of the March Hong Kong show, and they recognize that consumer confidence and consumer demand will be determined by what happens in the coming months. After all, wholesale cannot sustain its strength when consumer demand is in question.

Chow Tai Fook Caution
   Chow Tai Fook, the world’s largest jewelry retailer with over 1,800 points of sale, reported that same-store sales fell 2 percent year on year during January and February, due to the weaker retail sales in the Mainland China market, where same-store sales fell 7 percent during the two-month period. Overall retail sales volume was down by 10 percent in the Mainland. The company commented that the only bright spot in retail sales in Mainland China was the Chinese New Year holiday. Meanwhile, its wholesale business in Mainland China was weak because franchisees remained conservative in their inventory replenishment, especially for high-end gem-set jewelry products.
   As Chow Tai Fook has shifted its major business to Mainland China in recent years due to its increasing demand and large population base, the company’s results are an important barometer for the overall market in the region. Right now, it is still too early to conclude that the Mainland China diamond and jewelry market has substantially improved from 2012. Trade members will have to keep a watchful eye on business as it develops there in the coming months.
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