Share this
Digg
Del.icio.us
StumbleUpon
Netscape
Yahoo
Technorati
Googlize this
Facebook
Export PDF
Print
E-mail
THE LISTING OF Chow Tai Fook, the world’s biggest jeweller, on the Hong Kong Exchange last month went off with a whimper rather than the thud that many were expecting. Blame the recent correction in gold prices. The company, which runs about 1,500 jewellery shops in China, Hong Kong, Macau and Taiwan, had rea died its IPO that raised US$2 billion when gold prices were surging, but was forced to delay the listing because of market volatility. Though the listing was priced at the absolute bottom of the earlier indicated range, the jewellery chain’s stock has since slid more than 4% below its IPO price.
Even so, Chow Tai Fook is no pushover. With a market value of US$18.7 billion ($26.16 billion), it is worth more than twice as much as New York-listed Tiffany & Co, which has a market capitalisation of just under US$8.4 billion. And while it may not have the bling of Tiffany, Chow Tai Fook’s margins are far bigger. The jeweller is majority-owned by an 86- year-old Hong Kong billionaire who also owns the territory’s fourth-largest property firm, New World Development, and has extensive infrastructure investments in China.
I remember interviewing Cheng and his son Henry, who has effectively run the empire for two decades, in the mid-1990s. The elder Cheng’s story was a classic rags-to-riches one. When he was 20, he fled China in a boat to Macau, where he started as a clerk in a small jewellery store. He ended up owning the store after he married the owner’s only daughter. Sixty years on, Cheng, who is said to be worth more than US$15 billion, now runs the world’s largest jewellery chain. It’s all because of China’s obsession with the glittery stuff.
Though Cheng began entrepreneurial life as the owner of a jewellery store, he soon diversified into property. That’s the real gold in Hong Kong. When I interviewed him and his son 16 years ago, the jewellery shops were just a tiny part of the family empire. I recall that the Chengs didn’t really want to talk about their private little gold-shop chain. You’d see the Chow Tai Fook shops in Hong Kong, but it was New World’s office blocks, hotels, malls and, of course, housing developments that brought the Chengs fame and fortune.
It wasn’t until a large middle class started emerging in China a decade ago that Chow Tai Fook really took off. Until then, the jewel lery chain had a couple of dozen shops in Hong Kong (it now has more than 50 in the territory). The Chengs began opening new stores across China and expanded in Taiwan and Macau. The stores that once had a dowdy China town-jewellery-shop look were spruced up. They might not have the cachet of Van Cleef & Arpels stores, but given the fact that their clientele is middle-class mainland Chinese, they are as upscale as a mass-market Chinese jeweller can get.
As recently as 11 years ago, gold prices were languishing at just over US$200 an ounce. Last August, gold broke through the US$1,900 ceiling and was hovering around US$1,650 an ounce this past week. While the yellow metal has long been seen as a hedge against inflation and the deteriorating European sovereign debt crisis was a key catalyst for the precious metal’s surge last year, it is investment and jewellery demand from China and India that are really dri ving gold.
