HK jewellery chain giant braces for headwinds

The world’s largest listed jewellery chain, Chow Tai Fook Jewellery Group, is expecting sales to slow down this fiscal year, amid the ongoing austerity drive and economic uncertainties in China.

A customer tries on rings in a Chow Tai Fook Jewellery Group Ltd
Source: Bloomberg

The Hong Kong-based company’s trimmed outlook follows similar warnings from other luxury goods companies with exposure to China, such as Prada and Dynasty Fine Wines.

Earlier this month, Prada signalled a possible cut to its full year guidance after sales in the April quarter fell in Europe and Asia.

While Chow Tai Fook was pretty confident with the mid to long term outlook, it expects near term growth to be held back by last year’s high base when it enjoyed a spike in demand amid falling prices.

That helped the company post a 32% rise in profits at HK$7.3 billion ($942 million) for the March quarter.  

With slower growth of mainland tourists to China, Hong Kong-listed jewellery companies, such as Luk Fook Holdings and Chow Sang Sang, along with luxury goods companies with exposure to the Chinese market could face similar headwinds. Growth has already been hampered by weaker consumer sentiment weighed down by concerns over a property slump.

Ahead of the Singapore Open

All major US bourses closed on a positive note, ahead of the Federal Reserve’s monetary policy decision tomorrow. The Dow Jones was at 16,808.49 (+0.16%), S&P 500 at 1,941.99 (+0.22%) and NASDAQ at 4,337.23 (0.37%).

However, investors sentiment could be weighed down by Japan’s softer than expected trade numbers for May. Exports fell 2.7% from the previous year, its first drop in 15 months, against market expectations of a decline of 1.3%.

Imports were also weaker at -3.6% instead of market expectations of a 1.8% rise. Some of the decline has been attributed to the ramped up spending ahead of April’s consumption tax hike.

China has also blocked a European alliance, which was designed make routes more cost-efficient; this could hit sentiment in major shipping stocks.

We are calling for the MSCI Singapore to open -0.50 points at 371.30.

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