At a shopping mall in western Beijing, Jiang Xue points to a rectangular gold pendant inscribed with a galloping horse and hands half her monthly salary to Chow Tai Fook Jewellery Group Ltd.
The 42-year-old accountant is one of millions of consumers in the world’s most-populous nation purchasing gifts this week for holidays starting tomorrow that mark a change in the Chinese zodiac calendar from the snake to the year of the horse.
Jiang’s $690 present for her mother is helping to fuel sales at Hong Kong-based Chow Tai Fook that surged 26 percent in the three months through December, while the biggest annual gold-price drop since 1981 reduced the cost of making jewelry, coins and bars. The retailer’s shares advanced 54 percent from a record low in June, outperforming benchmark Chinese equity indexes, and 21 of 29 analysts rate the company a buy.
“Older people believe gold brings good fortune and keeps its value,” said Jiang, who left in search of another store because the small horse charms she wanted for her nieces and nephews were sold out. “Gold gifts for children teach them about investment from a young age.”
Demand in China for jewelry, bars and coins rose 30 percent to 996.3 tons in the 12 months to Sept. 30, the highest of any nation, World Gold Council data show. Net imports of bullion from Hong Kong more than doubled in 2013 to 1,108.8 metric tons.
An index of the share prices of Chow Tai Fook and four competitors from Hong Kong and the mainland — Chow Sang Sang Holdings International Ltd., Luk Fook Holdings International Ltd., Lao Feng Xiang Co. and Zhejiang Ming Jewelry Co. — climbed 5.9 percent in the three months through December as gold dropped 9.3 percent. It fell 1.7 percent this month while bullion advanced 4.8 percent.
“Lower gold prices give an extra boost to demand,” said Yang Chunyan, an analyst at Orient Securities Co. in Shanghai. “Sales of gold gifts typically accelerate in the two weeks leading up to the lunar new year and have really taken off.”
The magnitude of the gains in sales and share prices last year may temper returns in 2014.
Read more at Bloomberg