COMMENTARY

China’s corruption crackdown isn’t likely to hurt the world’s largest jeweler

Revenues at Chow Tai Fook, the world’s largest jeweler by market capitalization, jumped 63% year-on-year while sales for its gold items grew 78% for the quarter that ended June 30.

Shares were up 13% in reaction to the news. The company attributed the jump to falling gold prices, which are down around 8% over the last three months. Wealthy Chinese from the mainland and Hong Kong started bombarding banks and jewelers like Chow Tai Fook for gold after the spot price of the yellow metal began to fall in April. Stores sold out of gold accessories and banks were short on their gold stocks.

But if cheap gold has been good for Chow Tai Fook, too-cheap gold may not be. If its price continues to fall, shoppers and investors might start to see it as a bad investment, and stop buying. Chow Tai Fook, which sells items from gold bars to bracelets and diamond rings, gets more than half of its profits from its gold products.

However, there’s one possible boon for the retailer: China’s recent crackdown on corruption—which has hit sales of luxury liquor, restaurant and car sales (paywall)—may be skirting over Hong Kong, the favorite shopping destination of the country’s elite. Sales of luxury gifts in Hong Kong are up—they grew 68% in April, compared to the same period a year before, and 35% in May, the most of any retail sector. That, in addition to good deals on gold, at least for now, is helping boost jewelers like Chow Tai Fook.

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