Rapaport Magazine

U.S Economy Shakes HK Show

Hong Kong’s annual show is typically a high-volume venue for jewelry, pearls and gems. However, continuing pessimism about the U.S. market caused exhibitors to rein in their expectations.

By Nancy Pier Sindt
RAPAPORT... This year’s edition of the Hong Kong International Jewellery Show, which was held from March 3 through 8 in the Hong Kong Convention and Exhibition Centre, set records in terms of size, hosting 2,306 exhibitors from 45 countries and regions. Attendance, however, reflected lowered expectations, with Chinese buyers charting an 18 percent gain and most others falling slightly. The number of American buyers at the show — which was expected to be down — dropped by 21 percent, from 1,934 to 1,525.This major show, organized by the government-funded Hong Kong Trade Development Council (TDC), is jointly organized by the Hong Kong Jewellers’ and Goldsmiths’ Association (HKJGA), the Hong Kong Jewellery and Jade Manufacturers Association, the Hong Kong Jewellery Manufacturers’ Association (HKJMA) and the Diamond Federation of Hong Kong, China.

Generally speaking, exhibitors remained optimistic, saying they had reworked their strategies to deal with current conditions. Solutions included refocusing on emerging markets, such as Mainland China, Russia and other regions in Southeast Asia, adjusting price levels to compensate for the escalating costs of gold and diamonds and introducing more new products.

By and large, the dominant categories at the show were diamonds and diamond jewelry and pearls. Diamonds came in all sizes, colors and qualities, but the biggest across-the-board trend was the use of micropavé. It showed up on all categories, from engagement rings to fashion earrings and necklaces. Pearls are always a focus here, with an entire floor devoted to loose pearls, strands and finished jewelry and two major pearl auctions, the Paspaley Pearl Auction and the Robert Wan Tahitian pearl auction.

Hong Kong remains the world’s fourth-largest jewelry exporter, following Italy, the U.S. and India. More than 70 percent of its output goes to the U.S., the European Union (EU) and Switzerland; in 2007, exports rose by 17 percent to $4.3 billion.

“After the 1997 return to China, the world wondered how it would turn out. But today, Hong Kong is bigger than ever — the law system has been maintained and we have gained [the world’s] confidence,” said Charles Chan, group chairman of Continental Holdings Ltd., chairman of the Hong Kong Jewellery & Jade Manufacturers Association and chairman of the TDC Jewellery Advisory Committee. His take on the U.S. market, in view of the weakened economy and higher prices of materials, however, is not quite so optimistic: “We have to proceed very cautiously. I have never seen this kind of situation.”

In sales of jewelry, there’s always a pyramid, observed Chan. “At the upper end, there is no effect. But at the bottom, with material costs up so much, it will affect sales.” He acknowledged that some manufacturers are using less gold and lowering the quality of diamonds in order to maintain prices. “But there is a limit to how low it should be allowed to go,” he said.

“The American economic slowdown or recession will affect the whole world. The U.S. is 5 percent of the world population but consumes 50 percent of the products. The mortgage market affects the whole world. Financial institutions have lower liquidity. These will all affect business, but how much, we cannot tell,” Chan noted. For many Hong Kong jewelry manufacturers, however, Chan said he believes the growth in China and other markets, such as Russia, may help offset losses from the U.S.

Gladys Do, director at WCJ Mfg. Ltd., agreed, noting that when an exporter serves a variety of different markets, and one is weak, he can usually depend on others to pick up the slack. Nevertheless, the slowdown in the U.S. has made the market situation “difficult,” show attendees said.

According to Albert Hui, general manager of Octagon Jewellery Co., Ltd., providing unique styles has helped his company’s sales over the past five years, as economies in the U.S. and Europe have changed. However, Hui is determined to maintain his high quality of materials and production, “We have not changed our business strategy; we will not use cheaper diamonds or materials.”

At IAD Jewellery Ltd., the jewelry manufacturing division of the Lee Heng Diamond Group, supply chain officer Hilda Lai observed, “In the U.S., they don’t want fancy designs, but fairly traditional styling. Japan likes fancier pieces and Europeans buy more fashionable designs. The Chinese market wants more solitaires and wedding bands. Diamond sales are growing rapidly in China.”

Thousand Million Jewellery Mfg. Ltd., another Hong Kong firm that sells a great portion of its production to the U.S., tailors its output to each retail level, said director Jesse Lau. For example, it concentrates on high-end jewelry for independents and volume-priced fashion for major chains and independent wholesalers. Diamond quality is G to VS in 18-karat goods; for volume users, diamond qualities of H, SI are set in 14 karat and have a wholesale range of $99 to $799.

“Jewelry has become a disposable item, so we make fashion pieces at moderate price points,” said Sammy Siu, marketing manager at Edelweiss Jewellery Ltd. For example, a popular new look for his company is jewelry with white and colored diamonds in smaller sizes for everyday wear. The goal is for affordable pricing. “We are like makeup artists,” Siu said, explaining that Edelweiss creates the illusion of larger stones by using imaginative setting techniques for small ones. His best-selling wholesale range is $350 to $700.

New introductions from WCJ include men’s jewelry and an engagement ring collection. “There is more potential for men,” observed Do. “There is a gap to develop.” The collection, which includes rings, bracelets and pendants, is less diamond-oriented and more gold-intensive, using the popular rose-gold coloration as well as yellow. “Heart in Heart” is an engagement series of semimounts with total weights of 2 to 4 carats. The standard diamonds for this company are H color and VS in princesses and baguettes and H, SI in rounds.

Among the most noteworthy styling trends at the show were amorphic, nature-inspired designs, from free forms to flowers, leaves and petals; graduated looks with the same motif repeated from small to large sizes and hinged, dangling and fringe designs. Earrings were either close to the ear or long, stiletto-type dangles. White gold remained dominant, but many designs were offered in a choice of white, yellow or pink. Pink gold, a color favored by Asians, continued to be a very strong look. Diamonds came in a rainbow of colors, from black and deep chocolate to subtle champagne, yellow and pink shades.

Article from the Rapaport Magazine - April 2008. To subscribe click here.

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