Chow Tai Fook, the world’s largest listed jewelry chain, Among Shanghai Jewelers in Price-Fixing Probe

July 20, 2013 Leave a comment

Chow Tai Fook Among Jewelers in Probe: People’s Daily

Chow Tai Fook Jewellery Group Ltd. (1929), the world’s largest listed jewelry chain, and other gold shops in Shanghai are being probed by Chinese regulators for price manipulation, the official People’s Daily reported online, citing unidentified people.

Chow Sang Sang Holdings International Ltd. (116) was also named as one of several companies “rectifying” their practices, after a National Development and Reform Commission investigation found wrongdoing, according to the report, which was reposted on a website controlled by the Ministry of Commerce. Chow Sang Sang isn’t being probed and doesn’t know why it was named in the report, Cathy Tam, a spokeswoman, said by phone today.The reported investigation, the latest sign of increased scrutiny of business practices by Chinese authorities, prompted shares of both jewelry companies to fall the most in three weeks. Global baby food brands are being investigated for possible price fixing, while GlaxoSmithKline Plc’s local finance chief has been unable to leave the country after allegations of “economic crimes” at the drugmaker.

Chow Tai Fook fell as much as 6.3 percent, the most since June 25, and traded 3.2 percent lower at HK$9.33 at the midday break in Hong Kong. Chow Sang Sang lost as much as 3.8 percent, also the largest decline since June 25.

Gold Prices

Many shops have admitted to authorities that they colluded on prices and hurt the interests of consumers, the report said. Brunswick, the external public relations firm representing Chow Tai Fook, couldn’t immediately comment on the report.

The investigation targets a rule by the Shanghai Gold & Jewellery Trade Association that limits the variation in gold and platinum prices to no more than 2 percent or 3 percent of the prices it sets for the products, according to the report.

Shanghai-based gold companies Lao Feng Xiang and Shanghai Yuyuan Tourist are also being probed, according to the report.

Lao Feng Xiang’s public relations department declined to comment when contacted by Bloomberg News. Three calls made to Shanghai Yuyuan Tourist’s marketing department during business hours today weren’t answered.

Gold is heading for the first annual drop in 13 years after some investors lost faith in the metal as a store of value. Bullion fell 23 percent to $1,293.24 an ounce in London this year and reached $1,180.50 on June 28, the lowest level in almost three years. The plunge spurred purchases of jewelry and coins and demand from China is “incredibly strong,” according to Standard Chartered Plc.

Chow Tai Fook this month said first-quarter same-store sales rose 48 percent as Chinese shoppers rushed to buy gold products after the price of the precious metal dropped.

The company, controlled by Hong Kong billionaire Cheng Yu-tung, is betting China’s increasingly wealthy middle class will help boost profits. It plans to add 200 outlets this year, primarily in so-called third- and fourth-tier cities in China.

To contact Bloomberg News staff for this story: Stephanie Wong in Hong Kong at swong139@bloomberg.net; Li Liu in Beijing at lliu255@bloomberg.net

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