The 110-carat "Yellow Dragon" diamond, valued at $11 million to $15 million, would normally have been showcased in more established diamond markets such as Geneva, New York and London, said Vihari Sheth, managing director of Vihari Jewels and a third-generation diamond trader.

But Sheth decided to bring the stone to Singapore first due to growing interest for precious stones in the city-state, which she said has the potential to be on par with more developed gem markets within a decade.

"There's a lot more growth because it's such a small market in Singapore, and people who are coming in are becoming more aware of what's going on. It's only going to double," Sheth, who also crafts jewellery, told Reuters in a recent interview.

"There's always going to be demand for something which is this high-end and exclusive," she said of the yellow diamond. "The person has to find the diamond, the diamond doesn't find the person."

Sheth said 5-to 20-carat diamonds, valued anywhere from $500,000 to $6 million, are selling quickly. Most of her clients, who tend to be from their 40s to early 50s, are permanent residents of Singapore such as Indonesians, Indians and Chinese.

Her move is part of a broader trend of luxury product promoters shifting focus to Singapore and Asia from the West - and for good reason.

Singapore has about 1,305 people classed as ultra high net worth UHNW.L population, with estimated total wealth of $155 billion, said intelligence provider Wealth-X. This compares with nearly 43,000 ultra-rich individuals with combined wealth of close to $6.3 trillion in Asia as a whole.

For these people, diamonds are not just a status symbol - they also offer investment potential by delivering stable and consistent returns, said Mykolas Rambus, CEO of Singapore-based Wealth-X.

The prices for three-carat diamonds have surged by 238 percent, while the figure for one-carat diamonds has risen by 88.9 percent since 2001, Rambus said.

"UHNW luxury consumers tend to view diamonds, precious stones in general and precious metals as stores of value as well as modes of wealth preservation," he added.

But others in the diamond business said there are still some substantial obstacles to be overcome before Singapore can take its place among the prime diamond markets.

It can be characterized as a regional diamond centre as its central location in Southeast Asia makes it a convenient place for people in the region to buy the gems, said Eliad Cohen, managing director of diamond manufacturing and trading company Novel Collection Asia.

But Singapore lacks a premier diamond show to draw the biggest names in the industry, and its general 7 percent value-added tax VAT.L also applies to loose diamonds and jewellery, making it tough for the city state to develop as a diamond market, Cohen told Reuters in an email.

"Regardless of whether or not this VAT can be recovered by overseas purchasers, it clearly acts as a deterrent for tourists to buy in Singapore, and encourages locals to purchase in no-tax jurisdictions, like Hong Kong," he added. (Reporting by Eveline Danubrata, editing by Elaine Lies)

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