Sentiment Cautious as Hong Kong Show Starts

RAPAPORT... Expectations were low among diamantaires as the September Hong Kong Jewellery & Gem Fair opened Monday, with local unrest dampening prospects for attendance.Many companies have skipped the show for safety reasons, as anti-government protests have gripped Hong Kong since June. "The situation in Hong Kong as of now isn't good. Many of my clients don't plan to come," said Sujal Sheth of Hong Kong-based Sky Diam. "I don't expect a lot from the show."A significant proportion of Chinese buyers have stayed away because of the political tensions and heightened security on the border with Hong Kong, sources at the show said. Many exhibitors from major trading centers decided not to attend as a result - leaving a handful of empty booths - while others felt compelled to turn up because of the no-refunds policy held by the fair organizer."Quite a few people would have canceled, and we most probably would have done," said Aashay Bhansali of Veera Dimon, an Antwerp-based supplier of diamonds mainly weighing 1 carat and above. With fewer buyers present, more sales at the show will be between trading companies, Bhansali predicted.Informa Markets, which organizes the show, said its cancellation policy had been unchanged for "decades." Last month, the company rejected a request by the Antwerp World Diamond Centre, the Israel Diamond Institute and India's Gem & Jewellery Export Promotion Council to postpone the show because of the situation. "The visitors who showed up today are serious buyers," said Celine Lau, director of jewelry fairs at Informa, in a statement to Rapaport News on Monday. "This proves that the September fair is a must-attend event for industry professionals."The show venues are more accessible than they were a month ago, as demonstrations have eased and the Airport Authority obtained a court injunction restricting protests inside Hong Kong International Airport, where a mass sit-in mid-August caused flight cancellations. However, riots on Sunday led to closures at three Mass Transit Railway stations.Weak demandThe disruption in Hong Kong has coincided with sluggish consumer and dealer demand in the region as a result of the US-China trade war, as well as a wider slump in the diamond market. This has created an "amazing soup" of negative influences, noted Eliad Cohen, managing director for Asia Pacific at Novel Collection, an Israel-based supplier of fancy-color diamonds.The protests explain the lower buyer attendance, but the general slowdown in purchasing in the region emanates from economic weakness, and especially the depreciation of the Chinese yuan, an executive from a large Indian diamond manufacturer said on condition of anonymity. Polished demand is shifting to lower colors, with customers who previously bought D-to-F stones now preferring G to H, while the segment that previously focused on G to H is now looking at I-to-J goods, he explained. Retailers around the world are moving toward lower inventories rather than buying for stock, he added.Sources noted a slight improvement in select polished categories, as reduced manufacturing in Indian factories has created shortages. Dealers also hoped the holiday season would herald an improvement in demand.Meanwhile, diamond firms questioned whether the show was still worthwhile given the costs of attending and the availability of goods on the internet."You used to go to shows to find supply, but now you can order everything online," an exhibitor said. "For the price of one show, you can make six trips to your customers."The diamond-and-gemstone section of the show runs until Friday at AsiaWorld-Expo, adjacent to the airport. Finished-jewelry exhibitors will display their goods from Wednesday through next Sunday at the Hong Kong Convention & Exhibition Centre in the Wan Chai district.Image: Traditional dancers open the Hong Kong show at AsiaWorld-Expo on Monday (Informa Markets).