The stock market in China, where the economy is poised for the weakest expansion since 1990, has fallen 7.2 percent this year. Even global bullion prices have plunged this year, reaching $1,180.50 per ounce on June 28 in London, the lowest level in almost three years.
With a limited set of traditional investment options, wealthy Chinese have poured money into art and property. Nearby in Hong Kong, investors in search of new investments are snapping up taxis and licenses.
While the Chinese have also raised spending on pricey items such as diamonds as incomes have risen, jade holds a special place because of a long cultural tradition.
Profit Margins
Sun says his father taught him how to pick out a good piece of jade as a kid, and he loves the gem because its color is vivid and every piece different.
“By buying jadeite and diamonds, we are essentially buying natural resources, which is a relatively safe long-term investment,” he said. “It will surely beat inflation.”
For Chinese jewelers, gross margins on gold items are in the “mid-teens,” compared with 40 percent to 50 percent on sets with gems such as jade or diamonds, said Fischer, the CLSA analyst.
Chow Tai Fook says that if an investor wishes to sell the gem, it buys from them. The Hong Kong-based company recently sold a jadeite bead necklace for over $1.3 million and expects to keep capitalizing on that demand. Managing Director Wong says jade prices have almost tripled since 2005 and are likely to rise at a compounded rate of 15 percent to 20 percent each year.
One VIP customer recently showed Wong his jade collection. The client, a property developer in Northern China, had built up a set of more than 100 jadeite bangles, each costing at least 1 million yuan ($163,000). His jade, Wong said, was simply “portable wealth.”