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Hong Kong's Diamond & Jewellery Business Hits a Bad Patch
China will continue to expand with more funds coming into the hands of Chinese consumers...
By: M.D. Dewani
Feb 25 2006 12:00AM
Reference: 2054  


The diamond and jewellery business in Hong Kong is in bad shape at present, according to observers that have been visiting Mumbai recently.

Business activities in luxury items have slowed down. Barring a few varieties like stars, prices of cut & polished diamonds have declined by 5-7 per cent over the last November-December months. Suppliers may like to prune prices further, but they do not find it prudent to do so. Inventories have gone up for want of adequate offtake as good reliable buyers are few and far between in the market. Only such buyers are mostly seen in the market at present whom it might be considered risky to sell. Everyone in this business is eager to sell old stock, but it is difficult to do so for want of adequate demand. As a sequel, prices continue to decline.

The current slackness in the diamond business has severely impacted wages payable to artisans. On the average wages are down 10-12 per cent, as the factory owners' volume of business has declined. Almost 20 per cent of the factories are nearly idle at present.

This diamond business is also facing stringent money conditions at present. This can be seen from the fact that interest rates have moved up to 8.00-8.50 per cent from about 6.00 per cent earlier. Money stringency is due both to increasing inventories and inordinate delays in receiving payments for previous sales. One cannot expect these days payments before a year, for internal sales. In regard to export sales, a minimum delay of 4-5 months beyond the negotiated credit terms is usual.

This has affected valuations of property as well during the past few months, prices of residential property have declined by 2.00-2.50 per cent. The fall in values of commercial property has been as much as 10-15 per cent during the same period.

Currently about 200 Indian and nearly 100-150 Israeli firms are engaged in diamond business in Hong Kong. Most of them are affected by the current business slackness. It is not uncommon these days to find some Israeli dealers moving from store to store, in a bid to retail just a few gemstones here and there.

When the going was good, several entrepreneurs could be seen opening retail jewellery stores, with many more planning to do so, in the hope that the boom time had come to stay.

This expectation has almost fallen through. Those who have already opened such stores are anxiously waiting for an improvement in the market. New- comers have shelved their plans for the time being at least.

Earlier it was believed that the retail jewellery business in China will continue to expand with more funds coming into the hands of Chinese consumers. However, domestic jewellery sales in China have also slowed down of late. Many who are already in this field, are now seen paying more attention to speculation in shares, foreign exchange and bullion. Nearly 10-15 per cent of the retail stores have closed down.

About 7-8 Indian firms have entered manufacturing activity in China so far. However others who were planning to do so, seem to be holding back. Every one seems to be worried about the present difficult situation through which the market is passing. The business environment started deteriorating particularly since September 2005. The present situation is quite worrisome. Unless this situation improves, further adverse impact on business cannot be ruled out, according to Kamlesh Shah of Hong Kong's In Collection and many others.

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kacha purvesh
hi there.. i m also consulted with this business. so let me know sir about future of this business.. i means future after 6 months and almost after 1 year and all that.. please let me know.
i want to have swaroski diamond so may i know wherer i will get it?plz reply fast
dear sir how 2 be DB market in hong kong dark brown market in hong kong plz say me
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