Sarine

Sarine: Bloomberg reports that the China-led commodity slump is now hitting the diamond industry, with cooling demand for jewellery from the Asian giant causing a build-up in inventories and price slides.

Reinforcing this view, Chow Tai Fook Jewellery, the world’s largest listed jewellery chain, registered a 13% decline in 2Q revenue this month, weighed by China’s clamp down on corruption and extravagant spending.

De Beers, which sells ~35% of the world’s rough diamond production, has cut production twice this year by a total of 15% and lowered its selling prices, yet this has proven to be insufficient, with customers rejecting 35-50% of diamonds on offer at De Beers’s Oct sight.

The news will be negative for diamond testing equipment maker, Sarine Technologies, which recently warned of an operating loss of US$1.5m in 3Q15 due to persistent rough-to-polish diamond price mismatch and residual inventory overhang.

Following the profit guidance, Maybank-KE has slashed its FY15-17 earnings forecasts by 88%, 18%, and 10% respectively and downgraded the counter to Hold from Buy, with a lower TP of $1.29.