With the Antwerp diamond industry facing a host of challenges, and developing multiple initiatives, when it comes to financing, it appears that one bank recognizes an opportunity. Avi Krawitz of Rapaport News today reported that the National Bank of Fujairah (NBF) from the United Arab Emirates (UAE) is planning to open a representative office in Antwerp. Davy Blommaert, head of diamond lending at NBF, told Rapaport News on the sidelines of the Dubai Diamond Conference, “I’ve been pushing for the move for a long time because there’s an opportunity to cherry-pick some clients.”
Standard and Poor's has reiterated its negative outlook rating for Botswana as a result of, "The country's narrow economic base, which relies heavily on the diamond sector and is vulnerable to external shocks, despite efforts to diversify." Diamonds account for approximately 80% of Botswana’s total exports and about one-third of its gross domestic product, and "remains its main economic locomotive".
Russian diamond mining giant ALROSA today (Tuesday) announced that it prepaid a $600 million bank loans received from VTB Bank in 2012 and extended in 2014 until October 2018. ALROSA paid back the bank loan with its own cash funds, thus reducing its debt on loans and borrowings to $1.7 billion, while its average interest rate decreased from 6.6% to 6.3%. ALROSA has made it a priority in recent years to cut down its outstanding loans.
India’s Prime Minister Modi today announced that the existing 500 and 1,000 rupee notes, the highest denomination notes in the country, will be taken out of circulation in 24 hours, to be replaced by new notes of the same denomination. The current notes will no longer be valid as of tomorrow, November 9. The bold measure is intended to combat counterfeiting, (tax) fraud and corruption by making the so-called “black money” visible. The abolished notes can be exchanged at banks until December 30.
Diamond companies, especially the small and medium-sized firms who make up the bulk of our membership, cannot easily access financing. Diamond manufacturing and trading companies need to finance their operations, however with banks facing higher capital requirements, risk aversion and increased regulatory burden, the financing they make available to diamantaires has fallen significantly in recent years and that has meant reduced operational flexibility and increased vulnerability to market movements for diamond companies.
By Chaim Even-Zohar. Reprinted from Diamond Intelligence Briefs by special arrangement. Read the second part of this article here.
Hong Kong Jewellery Magazine takes an in-depth look at the adjustments the diamond industry is, or should be, implementing in order to accommodate the changing economy and consumption habits in an environment where the diamond industry "at large is under the gloom of the stagnant economy that impedes buying sentiments in end consumers." With the assistance of three industry insiders - Erik Jens, head of the diamond and jewelry division at ABN AMRO Bank, Nissan Perla, founder of Olympic Diamond and the Diamond Registry, and Lawrence Ma, chairman of the Diamond Federation of Hong Kon
After years of discussion between the Antwerp diamond industry and the Belgian Government, in 2015 it was decided to introduce the “Diamond Regime” tax system, pending European Commission approval. Today the EC announced that the fiscal regime does not constitute State aid, and gave the green light to what has come to be known as the "Carat Tax". Implementation of this new tax regime will put an end to complex discussions between the Antwerp diamond industry and tax authorities on the control and valuation of diamond traders' stock.
We at ABN AMRO support initiatives that create more insight into the value chain, its key players, engages with the right side of the market and excludes areas which show less transparency or no willingness to learn and improve. We see other banks doing the same more and more. In the end there will only be credit lines available for companies with good corporate standards and track record, whether they are small or big doesn't matter ... We expect more consolidation and certain companies going out of business.
The vast majority of the diamond bankruptcies of late, however, have NOT been a result of business miscalculations, market downturns, or bad timing. They have all been planned, well-orchestrated moves to intentionally defraud other diamond industry stakeholders, particularly banks, of large sums of money. Many of these people - particularly in India - have been declared wilful defaulters by the banks and the authorities. And we’re all braced for many more.
ALROSA has agreed on the postponement of the payment of a $720 million loan from 2017 to 2019 with JSC Alfa-Bank. The Russian mining giant's repayment schedule for debt on loans and borrowing of $2.69 billion will be $370 million in 2017, $600 million in 2018, $720 million in 2019, and $1billion in 2020, the miner said in a statement.
The diamond mining giant is arranging investor meetings in the United States and the United Kingdom next month in preparation for the government's sale of a 10.9% stake in the firm, a Sberbank executive said on Friday. The Russian government aims to bank more than $900 million from the sale on the Moscow Stock Exchange later this year, Reuters reported.
The Singapore Diamond Investment Exchange (SDiX), the world's first and only commodity exchange trading in physically settled diamonds, is going live from Thursday. Once business takes off at the exchange, it will be portal-based and with transparent pricing. This could also bring investors into diamonds. All stones traded on SDiX are Gemological Institute of America (GIA)-graded and buyers of single stones can examine certificates directly via the platform, according to the report.
Uphold CEO Anthony Watson sheds light on how Financial Technology is finally transforming the legacy financial services industry and why it’s here to stay.
While the Internet has brought tremendous efficiencies to nearly every sector in the economy, the financial services industry remains relatively unimproved. Businesses today, in particular those in the diamond industry, are painfully aware of the lack of transparency, the lack of convenience and online functionality, the lack of interoperability between geographies, and the high fees charged by banks.
The Standard & Poor's Ratings Services (S&P) has revised downwards its outlook on Botswana to negative from stable, while affirming its 'A-/A-2' long- and short-term foreign and local currency sovereign credit ratings. The announcement came just days after S&P's rival, Moody's, reaffirmed Botswana’s credit rating of A2 for foreign and domestic bonds for 2016 while also upholding a stable outlook forecast for the diamond-rich country's economy.
Moody’s Investors Service has reviewed and reaffirmed, for 2016, Botswana’s credit rating of A2 for foreign and domestic bonds while also upholding a stable outlook forecast for the diamond-rich country's economy, the Bank of Botswana said in a statement. "At the same time, the rating remains constrained by the relatively slow pace of economic diversification and high dependence of the country on the diamond industry for growth, revenue and export proceeds," the central bank explained.
Barclays Bank Botswana is once again interested in financing rough purchases by local diamond cutting and polishing firms, according to a report by mmegi.bw. The report points out that many financers are reducing exposure to the diamond sector. Diamond manufacturers in Botswana bought $500 million of rough from Debswana, the De Beers-government joint venture, a 46% drop on the 2014 figures.
VTB Capital, a retail branch of Russia’s second largest lender, VTB, plans to take part in the privatization of ALROSA shares as a global bookrunner, the main underwriter, according to a media report from Russia. The bookrunner usually teams up with other investment banks in order to lower its risk.
Israel Diamond Exchange (IDE) President Yoram Dvash has called for an increase in credit lines to finance the diamond industry worldwide. He said the world diamond industry needs to work together to secure additional financing. He made the comments following reports last month that Standard Chartered Bank, which has about $2 billion in exposure to the diamond industry, was demanding additional loan protection from diamond clients. It is now asking diamond manufacturing clients to secure payment insurance or provide 100% collateral.
Bloomberg News TV is broadcasting an interview with reporter Joe Deaux in which he explains to viewers of the financial news service the background to reports last week that Standard Chartered Bank has decided to require diamond company clients to provide extra security on its loans. Diamond manufacturers, particularly in India, will be the hardest hit by the decision by the bank to curb lending. Dwindling demand and a credit crunch have hit the industry hard, says Deaux, along with falling demand from China.
Russian News Agency TASS reports that the Moscow Exchange is interested in developing the exchange trade in diamonds and is considering a relevant proposal made by the Russian diamond producer Alrosa, Chief Executive of the Exchange Alexander Afanasyev said on Thursday on the sidelines of the congress of the Russian Union of Industrialists and Entrepreneurs. "We are discussing this issue with Alrosa.
Singapore-based securities firm and investment bank UOB Kay Hian (the stockbroking arm of United Overseas Bank Ltd) has joined the Singapore Diamond Investment Exchange (SDiX), the world's first and only commodity exchange trading in physically settled diamonds, as its pioneer broker, writes The Business Times. This means UOB Kay Hian will be able to offer its accredited investors the chance to invest in diamonds as an asset class. Its affiliates in Hong Kong, Thailand, Malaysia and Indonesia will have the same access.
Signet Jewelers Limited, the world's largest retailer of diamond jewelry, is delisting its common shares from the London Stock Exchange, meaning it can only be traded on the New York Stock Exchange. Signet said it is taking the action because less than 1% of its annual trading volume is executed on the LSE. As a result, the benefit of LSE listing is outweighed by the cost, regulatory burdens, and time spent on LSE-driven activity. Shares will continue to be traded on the LSE until March 11, with cancelation taking effect on March 14.
The Antwerp World Diamond Centre (AWDC) has announced a new pilot project with two FinTech (financial technology) companies - Uphold and FX4BIZ - to offer the diamond industry in Antwerp international transactions across multiple currencies that are fast, transparent and instant. Sixty diamond companies may sign up for these two pilot projects that will run for a full year.
The Guardian writes that investors face a “cataclysmic year” where stock markets could fall by up to 20% and oil could slump to $16 a barrel, economists at the Royal Bank of Scotland have warned. In a note to its clients the bank said: “Sell everything except high quality bonds. This is about return of capital, not return on capital. In a crowded hall, exit doors are small.” It said the current situation was reminiscent of 2008, when the collapse of the Lehman Brothers investment bank led to the global financial crisis.
The National Bank of Fujairah (NBF) has opened a diamond financing office in the Almas Tower, part of the Dubai Multi Commodities Centre. The opening follows the establishment of a specialized diamond financing team in April this year focused on financing manufacturers and traders of rough and polished goods. According to a report in Emirates24/7, the unit brings in industry expert in order to provide a range of trade finance products tailored to client needs.
The International Monetary Fund (IMF) is adding China's yuan to its benchmark currency basket in a step that the Beijing government has long lobbied for to provide recognition of its global economic power. The yuan, also known as the renminbi, joins the dollar, euro, pound sterling and yen in the Special Drawing Rights (SDR) basket alongside. To meet the IMF’s criteria, Beijing undertook a program of reforms in recent months, including better access for foreigners to Chinese currency markets, more frequent debt issuance and expanded yuan trading hours.
Reuters reports that HSBC is closing its private banking unit in India, following the recent examples of other foreign banks, such as Royal Bank of Scotland and Morgan Stanley, who sold private their banking units in India as part of their global business restructuring. HSBC will offer clients the possibility of moving to HSBC's global retail bank and expects the closure to be finished in Q1 2016.
The Economic Times India reports Indian banks are tightening lending criteria to the industry, following massive defaults in the diamond and jewelry industry amounting to US$1.5 billion. For years, banks in India have been providing credit based on balance sheets, a move the report says is now backfiring. "Banks cannot lend based on balance sheet. One needs to understand the entire business of the clients and how they manage it with their suppliers and buyers,", Ramesh Ganesan, executive vice president, IndusInd Bank commented.
The price of gold is continuing to rise after lower-than-expected American job rises appeared to delay any interest rate rises by the U.S. Federal Reserve to December at the earliest and possibly not until 2016. On the Comex market in New York, gold futures with December delivery dates were trading up nearly $10 or 1% at $1,146.80 on Tuesday after briefly reaching the psychologically important level of $1,150 an ounce.
The International Monetary Fund (IMF) might restart its program of financial assistance to support Zimbabwe’s economic reform efforts as early as 2016 if foreign creditors accept the government's plans to clear debts to international financial institutions. IMF resident representative Christian Beddies said financial aid could resume once Zimbabwe fulfilled certain required processes “Basically, the Zimbabwe authorities are trying to garner support for their strategy to clear arrears to the IMF and other international financial institutions.
A sharp sell-off in the stock market wiped out over Rs 2 lakh crore ($30 Bn) from investors' wealth on Tuesday as the benchmark Sensex plummeted 587 points following weak domestic and global macroeconomic data. "Tracking weak cues from both domestic and global front, equity benchmarks tanked today. Mainly, sentiments were downbeat in reaction to weak macro-economic data of GDP. Adding to that, negativity on global front pushed benchmarks lower as the day progressed," said Jayant Manglik, president, retail distribution, Religare Securities Ltd.
Botswana's Finance Ministry has predicted a deficit of around $390 million, or 2.6 percent of its gross domestic product for the fiscal year, in no small part due to a decline in rough diamond sales. However, credit rating agency Moody’s believes the deficit for fiscal 2016 may be much larger. Diamonds account for almost 40 percent of Botswana's budgetary revenue, and around 85 percent of exports in dollar terms. The country is dependent on diamond sales to aid its national development.
With the Shanghai stock market battered again on Monday, the effect is being felt around the world with the Australian bourse losing losing $20 billion within an hour of opening on Monday and European exchanges expected to decline following the biggest decline for several years on Wall Street on Friday as the slowdown in the Chinese economy causes fears around the globe.
While many have been rushing to write off the euro, given the sovereign debt problems affecting several members of the eurozone in recent years and the ongoing turmoil regarding Greece, a leading analyst, Peter Schiff, points out that the single currency has survived for 16 years despite claims on many occasions that it would sink.
With the price of gold currently setting at five-and-half year lows, the influential Deutsche Bank forecasts prices will drop further to around $750 per ounce. Gold has slumped to just under $1,100 an ounce with worried investors waiting for news that will give it a fresh direction.
"Gold would need to fall towards $750/oz to bring prices in real terms back towards long-run historical averages," according to a new report from the investment bank.
IndusInd Bank today (Monday) announced that is has completed its acquisition of the diamond and jewelry financing business of Royal Bank of Scotland N.V. in India. The acquired loan portfolio is approximately Rs.41 billion ($638 million). The deal was first announced in April. Several members of IndusInd Bank’s senior management had been associated with the diamond and jewelry portfolio in Royal Bank of Scotland N.V.
The World Bank's Commodity Markets Outlook report published on Wednesday forecasts that the prices of all major commodities will like decline this year. In the jewelry industry, prices of precious metals, specifically gold, silver and platinum, will decline 9 percent in 2015 mainly as a result of lower investment demand. The bank forecasts gold prices to fall 12 percent this year, mostly due to expected interest rate hikes by the U.S. Federal Reserve.
For the second quarter, China reported gross domestic product (GDP) grew 7.0 percent on-year, apparently showing that the country's economy is stabilizing. But the published figure, along with other economic data, which beat forecasts by Western analysts, only served to renew long-standing concerns over the trustworthiness of data released by the government.
The price of gold on global spot markets plunged on Wednesday after the US Federal Reserve Chair Janet Yellen again pointed to the likelihood of an interest rate rise this year. The price of gold and the level of the US dollar operate inversely, and a rise in interest rates would lead investors to put their money into the greenback, thus causing its value to rise.