Launch of Singapore diamond exchange a wake-up call for Hong Kong

Head of new exchange says it offers first transparent and open price discovery mechanism for diamonds

PUBLISHED : Thursday, 05 May, 2016, 7:34pm
UPDATED : Tuesday, 10 May, 2016, 5:04pm

Diamond may be a girl’s best friend, but they are also an important rising commodity – and one where Hong Kong is now losing out to Singapore in terms of exchange traded business.

The Singapore Diamond Investment Exchange, backed by venture capital firm Vertex Venture – a wholly owned subsidiary of Singapore’s state investment firm Temasek – started offering electronic trading of diamonds for its broker members on Thursday.

Alain Vandenborre, executive chairman and founder of the Singapore Diamond Investment Exchange, said the new exchangere represented “a tectonic shift in how diamonds are traded”.

Up until now, diamonds have mainly been traded bilaterally by buyers and sellers, with no international price or transparency.

We should always consider if there is a need for any new markets or new trading system to promote commodities and precious metal trading
Haywood Cheung, Chinese Gold and Silver Exchange Society

“By providing the first ever transparent and open price discovery mechanism for diamonds, the exchange unlocks a major opportunity for investors to trade diamonds as an asset class,” Vandenborre said.

The new diamond exchange is independent of the diamond industry and has regulations to ensure investors and other industry players trading on the electronic platform do so in a transparent way.

The exchange has banking and depository services for cash and physical settlement and may introduce exchange traded fund or other derivatives products related to diamonds in the future.

Analysts say the Singapore move is a wake-up call for the Hong Kong government to take a more active role to promote the city’s commodities and jewellery business.

“Hong Kong has a very strong gold trading exchange while we also have a strong stock market. But now Singapore is moving faster than us to launch a diamond exchange,” said Haywood Cheung Tak-hay, permanent honorary president of Chinese Gold and Silver Exchange Society, which is used by many jewellery manufactures and retailers in Hong Kong.

“The government should take this as a lesson. We should always consider if there is a need for any new markets or new trading system to promote commodities and precious metal trading. If we do not act quickly to launch new markets, we may lag behind of other cities such as Singapore.”

Cheung said while the new diamond exchange in Singapore would add transparency in diamond trading, he believed it would not take much diamond or jewellery trading business from Hong Kong.

“Traditionally, Hong Kong customers focus on gold jewellery as well as jade,” he said. “Diamonds are getting more and more popular but are still not the mainstream in the Hong Kong jewellery sector.”

Chinese tradition requires gold jewellery for the bride’s dowry or as gift for weddings, newborn babies or retired workers, and China is the world’s largest gold consumer.

“In addition, the traditional way to trade diamonds has lasted for decades. This won’t be easily changed in a short period of time. It will take time for people to get used to using an electronic platform to trade,” Cheung said.