The diamond industry in Hong Kong has been keeping its vitality since emergence. It is now one of the key diamond trading hubs in the world. The city attracts major international diamond companies to come open offices for entering into the Greater China and other Asian markets. Moreover, the world’s most recognized gemmological laboratories have established their branches in Hong Kong to offer systematic trainings and diamond certification services. Hong Kong is an international trading platform renowned for its efficient logistics, reliable services and tax-free policy, contributing to the persisting growth of diamond trading these years.
Hong Kong Jewellery has interviewed Lawrence Ma, founding president and chairman of the Diamond Federation of Hong Kong (DFHK), sharing his views over Hong Kong’s important role in the global diamond market and the industry prospects for the coming year.
HKJM: Hong Kong Jewellery
LM: Lawrence Ma
HKJM: According to the Hong Kong Trade Development Council (HKTDC), Hong Kong’s total exports of precious jewellery in the first five month of 2014 decreased five percent year-on-year to HK$22.2 billion. Global economy in general was seeing a slow recovery while export performance got an unexpected setback. What are the reasons? How do you see the second half of 2014?
LM:The United States has carried out new monetary policy to revive the economy. Its overall economic performance in Q1 2014 remained in downturn while retail sales in major shopping malls rose a little, yet still below expectation due to the harsh weather early this year. When looking at the rest of the world, Japan’s economy is picking up fast while a slow recovery is seen in Europe. Many industry players are maintaining a positive outlook for the second half of 2014 and 2015.
In 2013, China put huge effort to tighten up monetary policy and crack down on corruption which had little impact on sales of high-end jewellery. For the market in China, bridal diamond rings are becoming an essential item for wedding in the first- and second-tier cities in Mainland China.
Moreover, many industry players started thinking that the overall economy is getting over the fluctuation and bottoming out to the revival. I think, many countries and regions in 2015 will have better economy, for example, the Philippines, Singapore and Taiwan are showing good economy performance. I also believe there will be business growth in the above markets in the second half of 2014.
HKJM: How do you see the role and competitiveness of Hong Kong's diamond industry in the globe in the coming five years?
LM:I am confident in the future development of Hong Kong's diamond industry. Hong Kong as an international market will keep its competitive advantage in the global market due to its duty-free policy, established financial system and efficient business environment. And, the four-time-a-year Hong Kong jewellery shows have kept growing.
As an international trading platform, Hong Kong has attracted increasing diamond business in recent years. Major international diamond companies have established branch offices here. In Hong Kong, we have the most efficient logistic system which can deliver goods to other offices in the globe within 24 hours. It is worth mentioning that in the Hong Kong jewellery shows, buyers are allowed to purchase on-site with cash.
Hong Kong manufactures have built up the largest jewellery manufacturing area in the southern part of China. Currently, thanks to its high productivity, diversified market-oriented designs and excellent craftsmanship, Hong Kong's jewellery is exporting to the global market with distinguished reputation.
New trends suggested that more and more diamond transactions are done between Hong Kong and Shanghai Diamond Exchanged (SDE) where provides a fair and transparent trading platform for Hong Kong diamantaires.
HKJM: For diamond wholesale and retail, what is the general performance in Hong Kong in recent years?
LM: The total value of diamond export and re-export via Hong Kong has seen growth amidst fluctuation in recent years. The diamond market in 2013 faired better than 2012, while 2011 had achieved the best performance among the three years. Diamond prices started surging to record high after the financial crisis in 2008-9 and went on a downward trend in 2012. For diamond manufacturers, 2012 is the most difficult year while wholesalers and retailers saw little impact.
Over the last few months some of the rough diamond prices increased over 20 percent comparing to 2012, thus I think profit for diamond manufactures will rise from 2013 to 2014. Wholesale prices of large-carat diamonds were stable. Demand for diamonds below one carat was on the rise.
In terms of the retail market, Hong Kong is a tax-free zone for one-stop sourcing. Retailers also provide sound quality guarantee for consumers. Different marketing strategies adopted by retailers to promote their brands and products include exquisite packaging, before- and after-sale services, good customer relationship, which help attract global customers to shop in Hong Kong.
HKJM: As diamond prices are becoming more transparent in the market, what are your suggestions for adding value through the diamond pipeline?
LM: On one hand, transparent diamond price limits profits; on the other, it increases consumers' confidence as diamond value is guaranteed by the ever-stable market. In fact, the sales volume keeps rising.
In Hong Kong, diamond certificate has been available since 1980s. A certificate provides consumers with confidence as well as a handy reference for product comparison with the 4C-grading printed on the certificate. Besides the grading, consumers can do more comparisons between dealers in terms of product design, before-and after-sale services, buyback, brand image, value growth potential, etc.
Every sector in the diamond pipeline is responsible for consumer education which also value to the product. The fast-growing internet technology allows a speed delivery of updated information to consumers who now have deeper understanding of diamonds. Strategic marketing initiatives also help consumers adapt to the current market trends.
HKJM: Synthetic diamond is a hot topic in the trade. In your opinion, how can the diamond industry stay healthy?
LM: Synthetic diamond reminds me what we were facing when man-made gemstones just came to the market. I believe the market is capable to adjust and make differentiation automatically while the industry should fully disclose synthetic diamonds to safeguard end-consumers’ interests. Many industry players do not take it as a threat to the natural diamond market. Consumers will make their choice based on the disclosed information.
Jewellery manufacturers can make use of the latest diamond testing equipment to detect the synthetic stones that mixed into natural diamond parcels. Disclosure failure will damage the credibility of individual companies as well as the entire market. It is manufacturers’ responsibility to maintain a stringent detection practice for the sake of consumers’ interest. Industry players should pay close attention to the news on synthetic diamonds and the impact of technological advancement on the development of the diamond industry. For retailers, it is their responsibility to educate the general public about the significance of diamond certificates.
HKJM: Could you give some advice to Hong Kong’s diamond companies when targeting the younger generations in Mainland China?
LM: We shall explore the market by learning their different mentality and consumption capabilities. Emotional motivation drives demands for diamonds. That is why the bridal market dominates diamond consumption. Moreover, due to the increased disposable incomes, consumers buy more diamond jewellery for various celebrations such as birthday, gifting to friends and relatives.
HKJM: It is reported that Mainland China still has huge potential to explore. How do you see the opportunities for Hong Kong diamond jewellery brands to explore the market?
LM: Mainland China is a huge and diversified market. Consumers in different provinces and municipalities have their preference in jewellery. For instance, MaBelle is a brand under Lee Heng Diamond Group. Its exquisite diamond jewellery is popular in the southern part of China, while jewellery in bigger size with bold design is favoured in the north.
We see more international brands penetrating into the mainland market with special design and brand image in these years. For us, we do not consider it a huge challenge as we target different consumers.
Strategy is key to win a market. Hong Kong brands have achieved high reputation and credibility in the mainland market. Besides, the rapid expansion of social network and e-commerce will assist us to win more consumers.
HKJM: What about exploring the emerging markets?
LM: Retailers in Southeast Asia prefer to buy jewellery from Hong Kong due to the advantage of tax-free and market concentration. Also because of the geographical and historical factors, Hong Kong jewellers find it more adaptable when tapping the markets in Southeast Asia than that in the mainland.
Southeast Asia is a booming market for jewellery consumption. Cambodia developed in a fast pace in the past five to six years. The markets in Thailand, Malaysia and the Philippines are relatively developed. Laos and Myanmar have become more open after launching foreign investment policies. In terms of purchasing preferences, the demand for high-quality diamonds, for example, VVS to VS clarity, is relatively high in Southeast Asia. I am confident to see more diversified diamond consumption in the near future.
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