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Singapore Precious Metals Market


 

Singapore is widely recognized for its political and economic stability. With its world-class legal, financial, and commodity infrastructure, it is wellplaced to accommodate the rising demand for gold investment products.

 

By Martin Huxley, Chairman of Singapore Bullion Market Association

 

Gold as storage of wealth

In Southeast Asia, gold is one of the few asset classes that people have a high preference for as a store of wealth. In some countries gold is regarded as more stable than the national currency in terms of intrinsic value. A demonstration of cultural and legacy traditions, people in Asia buy gold jewellery for weddings and to celebrate festive seasons.

In Singapore, people have a craving for minted bars and coins in addition to gold jewelleries. When in need for cash, Singaporeans will sell their gold jewelleries and investment bars to jewellers or borrow from pawn shops using gold as collateral.

Economic overview

Singapore is a hub for logistics, finance and high-end technology in Southeast Asia. Large imports and exports are the attributes to her economy (Table 1). Singapore also has very close connections with the Chinese economy through its extensive overseas network, which will become prominent with the takeoff of the ‘Belt and Road’ Initiative spearheaded by China.

Table 1

Population

5.6 million

GDP Growth

3.6%

GDP/P

$53,626

CPI

-0.2%

Policy Interest Rate

0.8%

Exports

$325 billion

Imports

$284 billion

Foreign Reserves

$280 billion

Foreign Debt

$426 billion

 

Source: Focus Economics

 

Abolition of Goods & Service Tax (“GST”) on IPM

Since Singapore government lifted the GST on investment precious metals (IPM) in 2012, import of gold and purchase and sales transactions have grown exponentially. Gold has become many portfolio managers’ choice in seeking a balanced investment using gold to avert excessive risks. As a matter of fact, Singapore has the largest pool of assets under management in Asia with SGD2.7 trillion in 2016, a surge of 7% year-on-year, according to the Monetary Authority of Singapore.

Singapore is widely recognized for its political and economic stability. With its world-class legal, financial, and commodity infrastructure, it is well placed to accommodate the rising demand for gold investment products. Singapore’s innate attributes of neutrality, transparent legal and judicial system, excellent connectivity, and reputation as an important financialcentre have long appealed to global investors.

 

All these favorable factors have led to a growth in the number of companies setting up bullion merchandising, trading, storage and refining operations in Singapore. Using Singapore as base in Southeast Asia, they are able to leverage all the advantages to expand into other Asia Pacific markets.

 

Development of Singapore precious metals market

Singapore’s role as a redistribution center for the region reached record levels in 1992, when gold imports reached 414 tonnes, almost half of Asia’s total consumption. The introduction of a 3% GST in 1994 softened the demand for gold products. GST was increased to 4% and 5% respectively in 2003 and 2004 and further to 7% in 2007.

The establishment of the Singapore Freeport in 2010 provided Asia with its own Fort Knox, outfitted with cutting-edge security. Located next to Singapore’s Changi International Airport, it offers 22,000 m2 of secured rooms and showrooms with direct access to the airport runway and secured by armed guards around the clock. A host of professional logistics forwarders including Brink’s, Certis CISCO, G4Si, Loomis and Malca-Amit, operate their vaults in the Singapore Freeport, providing experience and expertise in precious metals handling.

Recognizing that investment precious metals (IPM) are essentially financial assets like other actively traded financial asset classes, and to facilitate the development of IPM refining and trading in Singapore, the government announced in early 2012 that IPM would be GST exempt from 1 October 2012. As a result, the volume of non-monetary gold import jumped 78% and exports increased 37% in 2013 (Enterprise Singapore Statistics).

In 2014, two years after the abolition of IPM import tax, Metalor set up a precious metal refinery in Singapore, and subsequently gain LBMA accreditation. The gradual increase in volume of physical churned over the years has seen Metalor running up to its full capacity during peak seasons of demand.

At the 2014 London Bullion Market Association (LBMA) Bullion Market Forum in Singapore, Singapore Trade and Industry Minister Lim Hng Kiang announced the launch of Singapore Kilobar Gold Contract. A joint initiative of Enterprise Singapore, World Gold Council, Singapore Exchange and Singapore Bullion Market Association (SBMA), the contract introduced centralized trading and clearing of a physically delivered gold contract in Singapore. It comprises a series of six daily contracts, which gives buyers physical access to competitively priced kilobars on one stop. This was enhanced by the launch of the ICE One- Kilo Gold Futures launched on 17 Nov 2015.

Singapore Bullion Market Association

Singapore Bullion Market Association (SBMA) is a non-profit organisation established in 1993 for the purposes of representing key stakeholders from the precious metals industry, including bullion banks, exchanges, refineries, bullion merchants and secured logistics support companies. Supported by Enterprise Singapore and its members, SBMA plays a pivotal role in the development of Singapore as an Asian precious metals hub and also as one of the most global centres of connectivity for precious metals.

SBMA participates in many activities such as engagement with industry, governmental and non-governmental agencies, publishing industry-based articles, and marketing and advertising, but its focus remains in creating and ensuring collaboration between its members and extending the network to other regions in Asia from the Greater China to ASEAN and South Asia.

Asia Pacific Precious Metal Conference is an annual event organised by SBMA in Singapore with the prime purpose of connecting the industrialists and business entities in precious metals in Asia. Collectively, all these markets add up to a sizeable volume with a lot of diversities and opportunities.  The conference provides a platform for distribution of updated information about the development of both mature and emerging precious metal markets in the Greater China, ASEAN and India, as well as the financial technology that help to facilitate the supply chain from pricing, refining to delivery.

Disclaimer: Views are personal and not the views of the publisher.