June 6 (Bloomberg) -- The Rapaport Group plans to set up an online diamond exchange from October that’s open to banks, brokerages and other financial firms as well as industry members to benefit from increasing demand in China and India.
The exchange, to be called RapX, will offer real-time bid/ask prices and clearing services for institutional investors, Chairman Martin Rapaport said in interviews on the telephone and by e-mail. At present, about 7,200 industry members use Rapaport’s RapNet online exchange to trade, with about $6 billion worth of diamonds listed. There’s no estimate on the value of diamonds that’ll be available on RapX, he said.
Global rough-diamond demand may climb more than 6 percent a year in the decade to 2020, exceeding growth in supply, Bain & Co., a consulting firm in Boston, has forecast. China, the largest metals user, may overtake the U.S. to become the top market in 2015, according to the Antwerp World Diamond Center.
“Strong demand from top consumers in India and China in 2011 supported investment opportunities in this market,” said Sergey Filchenkov, a Moscow-based analyst at IFC Metropol.
Prices of so-called top-quality gems climbed 22 percent in 2011, the biggest advance since at least 2006, according to the RapNet Diamond Index, which calculates the average weekly price of the 25, best-quality 1-carat diamonds. The index declined 3.1 percent this year. A carat is a fifth of a gram. Spot gold rose 10 percent in 2011, rallying for the 11th straight year on increased demand, and is up 4.6 percent this year.
“The bottom line is the consumption story, especially in China,” said New York-based Rapaport, who introduced reports bearing his name in 1978, three years after becoming an apprentice diamond cleaver in Antwerp. “Diamonds are a store of value -- similar to gold.”
While the existing RapNet exchange that’s used by the industry is a so-called peer-to-peer network, where people trade directly with one another, the potential sellers and buyers on RapX won’t know each other, Rapaport said.
“The diamond world used to be a cozy market based on relationships,” said Claudio Ribeiro, chief executive at Carat Ventures, a Singapore-based diamond-investment company that uses the Rapaport index as part of its pricing model. “Now, the market has expanded beyond Antwerp and Israel.”
The U.S. accounted for about 38 percent of the global diamond market in 2011, China 11 percent and Japan and India 10 percent each, according to De Beers, which produces about 35 percent of the world’s rough diamonds.
China, India and Singapore posted the biggest gains in millionaires last year as Asia countered a decline in wealth in western Europe and the U.S., according to Boston Consulting Group. Millionaire households in China rose 16 percent to 1.43 million, while those in Singapore climbed 14 percent to 188,000 and India saw a 21 percent increase to 162,000, the Boston-based firm said in a report on June 1. Millionaire households in the U.S. fell by 129,000 to 5.13 million.
Graff Diamonds Corp., the London-based jeweler, intends to open 11 stores in Asia over two years to capitalize on rising demand, Chief Executive Officer Francois Graff said on May 27, before the company shelved plans for a share sale in Hong Kong. Singapore Diamond Exchange Pte. Ltd. has partnered with IDEX Online to sell diamond portfolios at minimum prices of $250,000 from July, majority shareholder Alain Vandenborre said May 22.
Rye Brook, New York-based IndexIQ Advisors LLC applied to the U.S. Securities and Exchange Commission in March to list an exchange-traded fund backed by diamonds, according to a filing. The company, which runs exchange-traded products, didn’t specify on which exchange it wants to list the diamond fund.
Rio Tinto Group and BHP Billiton Ltd. are seeking to sell their diamond assets. Rio said in March 27 it was considering selling the business as the mines in Canada, Australia and Zimbabwe no longer fit its strategy. BHP announced Nov. 29 that it’s studying the sale of some or all of its diamond unit.
Rapaport USA, Inc., based in Las Vegas, Nevada, owns the Rapaport - RapNet Diamond Trading Network.
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