FreePort Founder Sells Diamonds as Investment, China Bet
By Chanyaporn Chanjaroen
Alain Vandenborre, co-founder of The Singapore FreePort, said he had partnered with Antwerp Diamond Bank and other companies to sell diamonds as an investment, targeting increasing wealth in China and India.
Singapore Diamond Exchange Pte Ltd., or SDX, will offer polished diamonds of one carat and up from July 23, with a minimum price of $250,000 for each portfolio, Vandenborre, the majority shareholder, said in an interview yesterday. The broking company will help clients find buyers one year after their purchase with a 2 percent commission charge, he said.
Global demand for rough diamonds may climb at an annual average of more than 6 percent in the 10 years ending 2020, exceeding growth in supply, according to Bain & Co., a consulting firm based in Boston. China may surpass the U.S. as the world’s largest market by the end of 2015 as consumption increases by 25 percent a year, according to the Antwerp World Diamond Center in February.
“There are no new mines being found around the world right now,” said Vandenborre. “There is a consensus in the market, predicting a significant growth of the diamond pricing because of this imbalance between supply and demand.”
Jim Rogers, investor and creator of the Rogers International Commodity Index, said he is chairing the SDX four- person advisory board.
The number of billionaires in Asia rose to 351 last year from 245 in 2010, says Credit Suisse Group AG. That compares with 251 in Europe and 332 in North America. Millionaires in China may represent about 50 percent of the total across 10 major Asian economies by 2015, according to a study by CLSA Asia Pacific Markets, a brokerage and investment group.
Producers have struggled to find new large mines to replace aging assets and the last major mine to enter production was Rio Tinto Group’s Diavik in 2003. Production at some of the world’s biggest mines is falling as supplies of more accessible diamonds near the surface are depleted. Rio Tinto (RIO) and BHP Billiton Ltd. are seeking to sell their diamond assets.
Slowing economic expansion in China and India may curb demand. China’s growth, hurt by a property-market slump and weaker exports, declined to 8.1 percent in the first quarter, the slowest pace in almost three years. The Indian economy probably grew 6.9 percent in the year through March 31, the least since 2009, according to government estimates.
Internally flawless, one-carat diamonds have dropped 24 percent since the end of 2011 to $15,270 after rising 26 percent last year, according to PolishedPrices.com. The Standard & Poor’s GSCI Index of 24 commodities has lost 3.2 percent this year and the MSCI All-Country World Index (MXWD) has gained less than 1 percent.
No companies have had “meaningful” success to-date in promoting diamonds as investment because of the difficulties in valuation, the absence of a spot market and lack of liquidity, said Bain in its report published in December.
“If you have five different people value a particular diamond, you’ll get five different valuations,” said Edward Sterck, a London-based analyst at Bank of Montreal. “On top of that there is not a huge amount of liquidity, so once you make an investment, it’s very difficult to get out of it.”
SDX, which plans to open in Hong Kong later this year, sells only diamonds certified by the Gemological Institute of America at wholesale prices, said Vandenborre. IDEX Online, a diamond-selling platform, Malca-Amit Global Ltd. and Antwerp Diamond Bank are providing services to the company’s clients.
Belgian-born Vandenborre, 51, became a Singaporean citizen 10 years ago, he said. He co-founded The Singapore FreePort with the government and chairman Yves Bouvier. Vandenborre said that while he has a 10 percent stake in the company operating the FreePort, he relinquished his executive role and stepped down from the board earlier this year.
The facilities, near Changi Airport, opened in 2010 as a free-trade zone and offer maximum-security storage services for valuables including wines, fine arts and gold.