Chow Tai Fook Slides as Gold Enters Bear Market: Hong Kong Mover

Chow Tai Fook Slides Amid China Growth Concerns
A customer looks at jewelry in a Chow Tai Fook Jewellery Group Ltd. store in Hong Kong, China. Photographer: Jerome Favre/Bloomberg

Chow Tai Fook Jewellery Group Ltd., which makes more than half of its sales from gold products, plunged to a record low in Hong Kong trading as the precious metal entered a so-called bear market.

The stock dropped 9.6 percent, the most since its Dec. 15 debut, to close at HK$10.54, leading declines among jewelers. Tse Sui Luen Jewellery International Ltd. fell 5.7 percent, Chow Sang Sang Holdings International Ltd. lost 4.3 percent and Luk Fook Holdings International Ltd. slid 3.9 percent.

Immediate-delivery gold has lost more than 20 percent from its all-time high last September after Greek leaders failed to form a government. Chow Tai Fook may face slower growth amid gold’s slump and weaker economic expansion in China, said Castor Pang, head of research at Core-Pacific Yamaichi International Ltd.

“Chow Tai Fook’s profit is very sensitive to sales of gold products,” Pang said in a phone interview today. “It may not be able to maintain the high growth it had last year.”

The company’s profit for the year ended March 2011 jumped 65 percent to HK$3.5 billion ($450 million) from a year earlier, according to its listing document. The company expects to post net income of at least HK$6.3 billion for the 12 months ended March 31, it said.

Salary Cut

China, the world’s second-largest gold jewelry market, on May 12 lowered banks’ reserve requirements for the third time in six months.

Gross domestic product of China expanded 8.1 percent in the first three months of 2012 from a year earlier in the fifth straight quarterly deceleration.

Chow Tai Fook, which has more than 1,500 watch and jewelry outlets in 320 cities in China as well as in Hong Kong and Macau, plans to open as many as 200 jewelry sales points a year through 2015, Alan Chan, the Hong Kong-based jeweler’s director of group branding, said in a March interview.

The world’s largest listed jewelry retailer last week canceled back-office staff’s guaranteed bonus, equivalent to at least 3 months’ salary, starting this month, Apple Daily reported today, citing unidentified people. Chow Tai Fook couldn’t be reached to comment on the report.

The change may reduce the employees’ pay by 30 percent to 50 percent, according to the Hong Kong-based Chinese newspaper.

Chow Tai Fook’s stock has lost 24 percent since the beginning of the year, compared with a 4.5 percent gain in the Hang Seng Index.

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