Diamonds as an Investment

Singapore diamond exchange courts investors seeking diverse safe haven assets

Hong Kong businessman Simon Murray invests in diamond exchange and introduce new investment product for the rock that is ‘a girl’s best friend’

PUBLISHED : Thursday, 12 October, 2017, 3:52pm
UPDATED : Thursday, 12 October, 2017, 9:59pm

Shirley Bassey sang that “diamonds are forever” while for Marilyn Monroe they will always be “a girl’s best friend”, but the precious rock is now increasingly being seen as a commodity traded by investors in turbulent times.

The Singapore Diamond Mint Company, of which well known Hong Kong businessman Simon Murray is vice chairman, on Thursday launched a new product called the Diamond Bullion – a credit card-sized package of investment-grade diamonds in a case.

The product is exclusively listed on the Singapore Diamond Investment Exchange, of which Murray is a shareholder. While most diamonds are traded between buyers and sellers directly, the Singapore exchange is an electronic platform for trading investment-grade diamonds.

“Diamonds are the new gold as an investment product,” Alain Vandenborre, executive chairman and founder of the exchange, told the South China Morning Post on Thursday.

He said that while diamonds and gold can be used as a hedge against risks from political events and currency devaluations, only 2 per cent of diamonds globally are used for investment purposes, with the rest mainly used in jewellery manufacturing.

Hong Kong leads global trend of women buying diamonds for themselves, says De Beers

In contrast, only 40 per cent of gold production is for jewellery and 60 per cent is for investment.

Vandenborre said this was because there are many regulated exchanges trading gold in a transparent and liquid market, and there are now a lot of gold investment products ranging from gold bars and coins to gold futures and exchange traded funds using gold as collateral.

He said that diamonds previously had no regulated exchange trading while there was also a lack of diamond investment products.

Vandenborre, originally from Belgium and a Singapore citizen for 21 years, teamed up with Murray and investors from the US and Asia, including Temasek’s Vertex Holdings, to establish the diamond exchange under the regulation of the Monetary Authority of Singapore.

Earlier this year the exchange set up its 40 per cent owned Singapore Diamond Mint Company to produce the Diamond Bullion as its first investment product.

Murray said the diamond exchange is a true price discovery mechanism for the industry as a whole. “With the introduction of the Diamond Bullion, we are enhancing the trading and liquidity of diamonds as an asset class,” he said.

Investors can trade products via the exchange brokers and receive physical delivery of the products, or they can trade on the exchange electronically. The product has a unique optical signature recognition system and serial number so investors can use a mobile phone app to check its authenticity.

With the introduction of the Diamond Bullion, we are enhancing the trading and liquidity of diamonds as an asset class
Simon Murray, vice chairman

“At a time when the world is facing unprecedented geopolitical situations and economic uncertainty, the Diamond Bullion is a safe-haven asset that is a shining example of the unlocked value of a new investment opportunity, representing a new store of wealth,” Murray said.

The Diamond Bullion will be initially available in two case colours of silver and gold in denominations of US$100,000 and US$200,000 respectively. A copper case will be launched later.

The Silver Diamond Bullion product had a soft-launch on October 2 and closed at US$106,500 on the diamond exchange on Wednesday.

The Gold Diamond Bullion is accepting pre-orders now ahead of its official launch in January.