TWO former senior employees of UOB Kay Hian Private Limited (UOBKH) were charged on Wednesday for allegedly lying to the Monetary Authority of Singapore (MAS) in relation to reports on a then Catalist aspirant. Lan Kang Ming, 38, and Wee Toon Lee, 34, each face three charges of providing MAS with false information in October 2018 in relation to due diligence reports on an unidentified company applying to list on the Catalist board of the Singapore Exchange. MAS said in a media statement on Wednesday that it was performing an onsite inspection of UOBKH between June and August 2018, to assess the latter's controls, policies and procedures in relation to its role as an issue manager for Initial Public Offering (IPOs). During the examination, Lan and Wee were said to have provided different versions of a due diligence report relating to background checks on a company applying to be listed on the Catalist board of the Singapore Exchange. UOBKH had acted as the issue manager
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By Thomas Biesheuvel – Bloomberg
30 April 2013
China’s burgeoning middle class is buying diamonds so quickly that the price of mass-market stones is rising faster around the world than for top-quality jewels affordable only to the super-rich.
Prices for a 1-carat (PLP44DBD) internally flawless “top white” diamond have gained about 7 percent in two years, while a stone of similar size and colour with slight imperfections jumped 24 percent, according to consultant PolishedPrices.com data.
“The Chinese consumer’s fascination with luxury goods has grown dramatically, along with their pockets,” said Angelito Tan, founding partner of Robert, Tan & Gao, a consulting firm on luxury market strategy with offices in Shanghai and Beijing.
The price jump in more flawed diamonds benefits producers such as Russia’s OAO Alrosa, the world’s biggest by volume with 30 percent of output in 2011, and De Beers, the largest by revenue. Chow Tai Fook Jewellery Group Ltd. (1929) (1929), a retailer with a $13.5 billion market value, said its average selling price dropped in the last six months as it sold more pieces.
Even as shoppers go down market in China, the world’s second-largest diamond buyer since 2011, the gap to top-flight stones is still large: A flawless 1 carat “top white” round diamond would cost about $28,800, according to online retailer Blue Nile, while a benchmark middle-market SI1-category diamond of the same size and colour would cost about $7,200.
China’s market was initially fuelled by rich elite pursuing the best diamonds available. As the economy grew, a new wave of buyers emerged, opening the market to lower-quality stones that form the bedrock of U.S. and European demand.
Taboo Disappears
The cultural taboo of having to buy the finest diamond is broken,” said Anish Aggarwal, a partner at Antwerp, Belgium- based industry consulting firm Gemdax. “Really high-quality was the sacred thing. You needed to buy fine diamonds, there was a snob effect. That has just disappeared.”
About 30 percent of Chinese sales last year were SI diamonds, the favoured clarity of the American consumer, up from 5 percent about five years ago, according to producer De Beers.
China is now an SI market which is increasingly similar to the U.S., said Aggarwal. “Five years ago, that would have been unthinkable. The whole landscape in how diamonds are sold to consumers in China has changed.”
China surpassed Japan in 2011 to become the biggest diamond consuming nation behind the U.S. Retail sales of diamond jewellery jumped 18 percent to $9.2 billion in 2011. Sales in India gained 17 percent.
Size vs Quality
Buyers in those two countries accounted for about 20 percent of global diamond demand in 2011 and that will rise to 28 percent in 2016 as the market grows to $31 billion from $23 billion, according to Anglo American Plc (AAL), owner of De Beers.
While Chinese buyers have lowered their threshold, they haven’t dropped to the lowest quality used in jewellery, sometimes called Wal-Mart diamonds because U.S. buyers find them largely in the superstore. “The gap is narrowing,” said Stephen Lussier, executive director at De Beers. “The Chinese are moving into those mid-range goods.”
The broadest category of mass-market diamonds, known in the trade as “commercial,” has advanced 31 percent in the past three years compared with a 6.3 percent gain for the best gems, according to PolishedPrices.com. Mixed diamonds, the lowest grade used in jewellery, have gained 22 percent.
Diamonds are ranked by the four C’s: clarity, cut, colour and carat weight. In terms of clarity, the highest quality diamonds are classed as flawless or internally flawless. Below that grade, the industry grades stones by their inclusions or blemishes: there are very, very small included, very slight included, slightly included, or SI, and included, or I, stones.
About 230 million people moved to Chinese cities between 2000 and 2011, the greatest urbanization in history, according to the Chinese Academy of Social Sciences. These city dwellers’ average disposable income rose 13 percent last year to 2,047 yuan ($330) a month, according to the statistics bureau.
Sales of discretionary goods in China will grow by a compounded annual rate of 13 percent between 2010 and 2020, as shoppers in the world’s largest economy after the U.S. become richer, McKinsey & Co. said in a report in March 2012.
Rising demand will put pressure on stretched supplies. Diamond producers have struggled to find new large mines to replace aging assets. Production at many of the biggest mines is falling as supplies of more accessible diamonds near the surface are depleted.
Botswana Gems
De Beers’s Orapa mine in Botswana began output in 1971, while its Jwaneng project, the world’s largest diamond mine by production value, and Rio Tinto Group’s Argyle started in 1982. The last major mine to enter production was Rio’s Diavik in 2003. Global diamond production slid 8.5 percent between 2005 and 2008 to 161.1 million carats.
The use of diamonds may expand at double the pace of supply through 2020 because of China and India, according to Bain & Co., the consulting firm. Bain forecasts that supplies won’t return to pre-financial crisis levels until 2017.
As the Chinese market broadens and consumers there seek a wider variety of goods, that increases demand for more varieties in the spectrum of diamonds mined. While each mine is different, fine diamonds account for a small percentage of production, so increased sales of lower-quality stones provide the biggest boost to revenue.
“For De Beers, the bull’s-eye of our production is in those medium colours and clarities,” said Lussier. “It’s useful now that we have two markets capable of consuming them. That’s where the significant majority of our value lies. It’ll be the minority of stones, but the majority of value.”
Price Gap
As demand grows for lower quality goods, the prices rise and the cost gap between them and the next price point closes. This can encourage shoppers to step up to the next level of quality -- until the price gap widens again.
“Traditionally, it was quality, and in particular clarity, that was the most important consideration, now it’s much more of a mixed bag,” said Gemdax’s Aggarwal. “People have latched on to the fact that when you buy a lower quality diamond there is not always a big difference in appearance. There is however, a big difference in price.”
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