Everybody loves a bit of sparkle. Crown jewels, Hollywood glamour, true love and even the odd curse are the irresistibly romantic associations that have made diamonds so desirable, so “safe” an investment. But look behind the glitter of Kim Kardashian’s new 20-carat diamond ring and cold economics would suggest that diamonds will not be an asset manager’s best friend for a while.

Wholesale prices for jewellery diamonds – as opposed to industrial diamond – have dropped about 20 per cent since the middle of 2014, according to an index published by Polishedprices.com.

The reasons are well known. China’s slowing economic growth, more aware­ness of the issue of conflict diamonds, fewer people getting married and the rise of synthetic diamonds have all helped to chip away at the diamonds-are-forever myth.

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But are these factors one should take into account at the top level of the market – the jewellery auctions such as the ones that will be held in Hong Kong in two weeks’ time?

There doesn’t seem to be a correlation between auction results and the broader, more pedestrian markets tracked by financial indices. There isn’t even much correlation between the performances of different houses in Hong Kong.

Last spring, Christie’s sold almost HK$910 million of jewellery (figures include buyers’ fees), and Sotheby’s managed to sell just over HK$290 million. This spring, the two changed places: Sotheby’s sold HK$572 million of jewellery, and Christie’s HK$469 million. And there was a big surprise last month when Beijing’s Poly Auctions – a newcomer – sold HK$207 million of jewellery, beating Sotheby’s for the first time, after the more established house failed to find buyers for many of its top lots. None of that fluctuation is in line with the gradual decline in overall diamond demand.

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A closer look at the results reveals that the jewellery auctions market is not unlike the art market. Ultra-wealthy collectors will always have the where­withal to buy the best and rarest. When Joseph Lau Luen-hung purchased two very large diamonds for his seven-year-old daughter last winter, he boosted the results of Sotheby’s and Christie’s jewellery sales in Geneva by a third and a quarter, respectively, and helped disguise weaker demand for the lesser rocks.


Other buyers, especially those affected by the China slowdown, have tightened their belts and so the middle market is where the strain has been showing.

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Take last month’s sales as an example. Sotheby’s couldn’t sell a ring described as a “very fine fancy intense purple-pink diamond and diamond ring”, estimated sale price between HK$41 million and HK$50 million. One competitor who wished to remain anonymous points out that in a market that relies on people who want the best, “intense” and “purple-pink” just don’t cut it. “People want ‘vivid’ and ‘pure pink’,” he says. Sotheby’s had one of those at its spring sale in Geneva and it fetched 30.8 million Swiss francs (HK$245.5 million) including fees.

Likewise, the rarity value of larger diamonds makes a difference. Sotheby’s didn’t sell a 16-carat “D Colour, flawless, type IIa” unmounted diamond with excellent cut – all descriptions that suggest it is a very nice diamond indeed – but Poly managed to sell two of a similar quality. Those two, however, were 30 carats, each.

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“We have to be more selective now. Since the last sale, we have decided to keep the lot count at below 200 pieces in Hong Kong,” says Yu Wen-hao, head of jewels and prestige collections at Poly Auction Hong Kong.

Still, market challenges are not stopping Phillips from launching its first jewellery sale in Asia this month and its Hong Kong specialist, Terry Chu Yin-yee, previously with Sotheby’s, says she has picked the pieces strategically.

“We want to be a boutique house rather than focus on quantity. We will have the usual quality diamonds and stones but we will also focus on more unusual items with a great story behind them,” she says.

At the top end, Phillips will be selling a diamond ring with a 7.93-carat fancy pink diamond that it values at HK$22 million to HK$26 million. But it will also be selling historic brooches that highlight the changing techniques and styles of this particular class of accessories. A Belle Époque emerald, natural pearl and diamond brooch, circa 1910, is valued at HK$8 million to HK$9.5 million and it was among the earliest pieces to be melded with platinum, a harder material than gold that allowed more intricate designs.

“The market peaked in 2012 and 2013, and we have seen slight adjustments since,” Chu says. “But what it means is that the speculators have gone away and the Asian market has become more mature, which is not a bad thing.”

Christie’s will hold its autumn jewellery auction on November 29 at the Hong Kong Convention and Exhibition Centre, in Wan Chai; Phillips will hold its jewellery and jadeite sale on November 28 at the Mandarin Oriental, in Central.