August 27th, 2017
DIAMOND MARKET OVERVIEW
Not much trading activity is expected until the Hong Kong show mid September. There are growing concerns about high inventory levels and overall sluggish polished demand. “There is a lot of nervousness among Indian companies regarding the Christmas season,” GJEPC’s chairman Pravin Pandya was quoted as saying in the media. Meanwhile, there was some positive news from Tiffany & Co which reported better-than-expected quarterly profit and sales. However, while sales improved in Japan, comparable sales in the US – its biggest market - fell 1%, which it attributed to lower tourist spending and weak demand across categories other than fashion and designer jewellery. Signet surprised investors with improved quarterly earnings and announced it was acquiring online diamond retailer JamesAllen.com. In other news, Swiss watch exports rose for another straight month in July, up 3.6% to $1.8 billion. In the broader market, main polishedprices index ended the week mostly flat at 117.17.
Sentiment in the rough market has turned more cautious. There are concerns in the trade about high debt levels among some major Sightholders, following reports of a bankruptcy. The sum involved, according to some in the trade, totalled around $130 million, of which around $75 million is outstanding to banks. With diamond banks tightening their lending criteria and other banks exiting the diamond industry, rough prices are likely to be affected. Some analysts expect only a marginal price increase in rough prices for the remainder of the year. “A 1% real increase in rough prices is probably the most optimistic trend line…” Canaccord Genuity’s analyst Des Kilalea said in a recent research note, adding the challenge will be to stimulate demand for diamond jewellery. “In our view, the second half of this year will likely see rough prices under some pressure, particularly ahead of the Indian Diwali holiday, with some respite possible in Q4,” the Canaccord Genuity note said. Meanwhile, De Beers is expected to leave prices unchanged at this week’s sight, amid a softening in rough demand in the secondary market. “All boxes are trading at a loss,” one Sightholder in Antwerp said.
CORPORATE AND EVENTS
Swiss watch exports climbed for a fourth month in five as growth in higher-end mechanical timepieces made up for a decline in cheaper quartz models, Bloomberg reported. Shipments rose 3.6 percent to 1.7 billion francs ($1.8 billion) in July, the Federation of the Swiss Watch Industry said in statement, the Bloomberg report said. Exports of watches wholesaling for more than 3,000 francs rose 5.9 percent, offsetting an 18 percent slump in timepieces costing less than 200 francs, said the Bloomberg report.
I don't envy Alessandro Bogliolo, the incoming chief executive of Tiffany & Co., and the luxe jeweler's quarterly earnings report on Thursday helped demonstrate why, Bloomberg reported. Yes, the company improved its profitability in the quarter, which seemed to cheer investors. But Tiffany's same-store sales were down 2 percent compared to the same quarter a year earlier, the seventh consecutive period in which the company was flat or down on this measure, the Bloomberg report said. That's bad enough, but Bogliolo's real problem is bigger than a string of disappointing sales results: It's that everywhere he turns, there are serious hurdles to turning things around, the Bloomberg report said.