Oct. 8 (Bloomberg) -- An 8.74-carat blue diamond, the size of a hazelnut, fetched HK$43.8 million ($5.7 million) in Hong Kong, the most expensive of its type sold at auction in Asia.

The emerald-cut, so-called fancy intense blue gem, went to an anonymous phone buyer after a two-minute tug-of-war with at least four rivals that escalated at a rate of HK$1 million a bid. The diamond has the third-highest grade of VVS1, which means it is very slightly flawed, according to host Sotheby’s.

A carat is one-fifth of a gram. New York-based Sotheby’s says it holds the per-carat world auction record for any gemstone with its May sale of a 7.03-carat cushion-shaped fancy vivid-blue diamond in Geneva for 10.5 million Swiss francs ($9.5 million); it was sold to Hong Kong property tycoon Joseph Lau.

“Only about a handful of such diamonds exist in the world,” said Fyzee Thambi, a Hong Kong-based gem dealer, in an interview at the venue yesterday. “That price is a bargain. In better economic times, people would have paid much more for it.”

Diamond prices have fallen 22 percent from a year ago to $6,893, according to the Rapaport Index, compiled using the average price for the 25 best quality 1-carat gems. Colored diamonds prices track the Rapaport Index loosely because of their rarity. Diamonds are prized for being portable stores of value.

Diamonds Favored

The highest prices at yesterday’s auction came from phone bidders, many of whom were represented by Sotheby’s European staff. Of the 318 lots offered, 255 sold, for a combined HK$254 million. Diamonds -- especially round, brilliant-cut stones -- were the favorites with bidders, followed by jadeites.

Six bidders fought for a 28.88-carat D-color, flawless, round diamond, driving the final price to HK$36.5 million, against the presale top estimate of HK$35 million. An 18.08 Kashmir sapphire-and-diamond ring fetched an Asian record of HK$11.7 million; the gem is named after its place of origin.

Asian and non-Asian buyers were equally matched at this auction, said Quek Chin Yeow, Sotheby’s Hong Kong-based deputy chairman and head of the jewelry department. Mainland Chinese buyers “featured strongly” in the 10 priciest lots of yesterday’s auction, Quek said in a statement.

At an earlier auction yesterday, a Jaeger-LeCoultre Gyrotourbillon 1, platinum perpetual calendar wristwatch sold for HK$2.3 million, with Chinese buyers “securing a significant number of top lots,” Sotheby’s said, without giving specifics.

With a day left, Sotheby’s auction has tallied HK$809 million, according to spokeswoman Rhonda Yung. Sotheby’s revised its sales target to HK$945 million.

Sotheby’s Hong Kong sale last year, held three weeks after Lehman’s Sept. 15 failure, raised HK$1.1 billion, half its forecast.

The auction ends today with the sale of Chinese ceramics.

Sotheby’s buyers’ commission is 25 percent of the hammer price for the first HK$400,000; 20 percent for an amount between HK$400,001 and HK$8 million; and 12 percent for any amount above that.

To contact the reporter on the story: Le-Min Lim in Hong Kong at lmlim@bloomberg.net

Last Updated: October 7, 2009 14:09 EDT