Chinese investors are abandoning property for jade in search of higher yields

Liquidations of Chinese stocks and bonds and widespread defaults in the country’s property market are causing wealthy investors to re-examine one of Asia’s most traditional forms of investment: jadeite.

A coup in Myanmar, US sanctions and the Covid-19 pandemic all but froze supplies of uncut stone, sending prices for finished jewelry bearing jadeite skyrocketing.

Myanmar produces 70-90% of the world’s supply of high-quality jadeite, which is the rarer and more valuable of two chemically distinct stones known collectively as jade. The stone is massively sold to buyers in China and Southeast Asia.

“The production [of jadeite] getting cheaper and cheaper,” said Tommy Chan, a Hong Kong business owner who recently started buying cheaper jadeite jewelry worth 80,000 to 200,000 HK dollars (10,200 at $25,500). “The value of jadeite will definitely increase.”

China’s stock indices have taken a hammer blow this year as traders worried about the country’s strict adherence to its zero-Covid policy and a spat between regulators in Beijing and the United States. The country’s benchmark, the CSI 300, is down more than 15% year-to-date, while Hong Kong’s Hang Seng index is down 13%.

China’s corporate bond market was also rocked by a wave of defaults in the housing sector, while property prices, a driver of wealth for decades, fell for 10 straight months after Policymakers sought last year to limit developer debt levels and restrict mortgage lending. .

“Investors need to think about how to diversify,” said Will Wang, head of client solutions and strategic partnerships in Asia at VP Wealth Management, the Hong Kong unit of the Liechtenstein-based private bank. “Many investors will see jade and jadeite. . . as part of their asset allocation.

Jade carved in a workshop at the Mandalay jade market in Myanmar. Chinese buyers often pass on high-end jadeite pieces from one generation to the next, limiting the supply of higher quality pieces. © Taylor Weidman/Bloomberg

Meanwhile, global trends such as soaring inflation and renewed concerns about the potential impact of Western sanctions on countries such as China following the war in Ukraine are pushing investors to stone. green and other luxury jewelry as alternative safe haven assets.

Daryl Ho, senior investment strategist at Singaporean bank DBS, said Western sanctions on Russia have increased the appeal of ‘bearer assets’ which investors can hold as individuals without having to rely on third parties such as banks.

“We have seen how people have lost half of their net worth with the stroke of a pen,” he said of the sanctions against Russia.

While jadeite’s coarse, reptilian exterior and heavy reliance on the in-person auction market make selecting a high-quality stone nearly impossible for the uninitiated, investors are buying finished jewelry by proxy, said Kitty Chan, director of the Hong Kong Jewelery and Jade Makers Association.

In December, the white paper on the consumption of jadeite industry in China in 2021 estimated that jadeite and jewelry had become the favorite collectibles of high-end Chinese investors – ahead of watches, luxury cars, fine wines and paintings – with 27% interested in acquiring pieces.

Chan, who is also sales manager at Sheentiff Jewelery, added that buyers were snapping up even mid-range pieces, which were not traditionally seen as a quality investment.

A customer looks at a piece of jade at the Jade Market in Mandalay
The Mandalay Jade Market. Shipments of finished jewelry containing jadeite, which are more accessible to uninitiated investors, have surged © Taylor Weidman/Bloomberg

Myanmar’s coup in February last year and subsequent civil war disrupted the already limited supply of jadeite. US sanctions against a series of military-linked jade entities in Myanmar, including its main licensee and regulator Myanmar Gems Enterprise, have further reduced supplies.

“From 1990 to 2000 or so when you go to the jadeite market when you resell your piece usually…the best you can do is multiply by 1.5 or multiply by 2 [in price]“, Chan added. “But now, if you get a good coin, the price can go up 10 times.”

Jewelery shipments containing pearls, precious and semi-precious stones from Hong Kong, one of the world’s most important centers for high-quality, laboratory-certified jadeite, jumped more than 100% in value the last year.

“As we sit here in these times of Covid, there’s so much money lying around, people want to find something to do with it,” added Calvin Lo, a Hong Kong investor who in May launched the Legacy Jewelery Fund, an investment fund.

Vickie Sek, president of Christie’s Jewelery Asia, which in May sold a jadeite bead necklace for more than HK$69 million, said there had been “increasing” interest in the high-quality jadeite pieces, spurred by an increase in demand from young buyers and investors.

Sek added that Chinese buyers investing in high-end jadeite pieces often pass them down between generations, limiting the supply of the best pieces. “Higher quality products are never cheaper,” she said.

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