Entering the Singapore Precious Metals Market – An Insider’s PerspectiveBy Joshua Rotbart, Managing Partner, J. Rotbart & Co.
Published on June 1, 2017
I first arrived in Hong Kong seven years ago and was hired by the global logistics company, Malca-Amit. In 2011, the construction of the Singapore Freeport was completed, and major bullion houses and banks were opening dedicated vaults within the facility. During this period, Singapore was cementing its position as an international wealth management centre at a time when global demand for investments in physical precious metals was growing. An exciting opportunity introduced itself and I was offered a move to Singapore to oversee the new developments.
Singapore was in the right position to offer high-net-worth clients, private banks and institutions the opportunity to manage and have custody of not only their financial assets, but also physical holdings of tangible assets, mostly precious metals.
As the physical infrastructure expanded, so did the demand by international clients for reliable solutions for sourcing investment-grade bullion. In October 2012, the Singapore government decided to waive Goods and Services Tax (GST) on investment precious metals, boosting the market even further. During this growth period, many new dealers and retailers established themselves, promoting Singapore as the location for sourcing and storing investment bullion.
Malca-Amit saw an opportunity to provide this service in-house and set up a one-stop solution for our clients. The business idea was simple: offer high-net-worth clients an easy and secure way to invest in precious metals by providing them a complete solution, handling transportation, storage and trading through one point of contact. Bullion are fully allocated and stored, while clients could still enjoy unlimited access to their assets. We decided to tailor the solution according to the needs of individual clients, by accepting only high-value transactions, and by leaving the retail segment to other specialised firms. Clients could purchase new bullion, authenticate their current holdings, or value and liquidate heirlooms coins and bars.
Singapore was the perfect spot to launch the service. Success was fast and impressive as many clients saw the advantage of going to a reliable partner for an all-in-one solution. Clients also understood that having direct ownership in the physical metal means easy access to their holdings, which is especially important in times of crisis.
I launched J. Rotbart & Co. in April 2016 to offer the same services with a greater degree of innovation and flexibility. As before, clients of J. Rotbart & Co. find Singapore to be the preferred place to store their bullion.
Given the global scope of our services, we clearly see the opportunities in this industry, and the value in conducting the business from Singapore. As geopolitical tensions rise, and economic growth is still sluggish, more clients are realising that wealth preservation through investing in physical precious metals is the prudent thing to do. Moreover, the banking system is losing its attractiveness as the right counterparty for investment in precious metals, because on the one hand, regulatory requirements incentivise banks to cease offering these services, while on the other hand, investors are losing trust in the banks, especially since the financial crisis of 2008 and because of other developments in the financial world.
Singapore, more than any other city in Asia, is the most international place to conduct business; English is an official language and the rule of law is strong. Furthermore, financial and logistical infrastructures are well developed. There is a good presence of private banks, wealth management companies and trust companies, and the storage capacity for precious metals is in place. Vaults are operated by the four big global logistics companies, as well as by the local companies. On top of this, the industry enjoys support by the Singapore government, mostly through International Enterprise (IE) Singapore. As Switzerland’s glamour as a global centre for storage of precious metals is waning, Singapore stands to attract even more investors.
While the future for the precious metals market in Singapore looks bright, there are some challenges ahead that we must be ready to tackle.
As much as some would like to ignore it, precious metals could be used to hide or launder money. It is our responsibility to be alert and dutiful when conducting due diligence on our clients; it is prudent that we ask tough questions if necessary and be aware of our clients’ intentions. Self-discipline while conducting our business is prudent and ethical.
Another challenge is banking. Precious metals companies find it difficult to bank. Our experience has been good in Singapore, where banks are very open to this industry. However, it is important that all relevant parties in Singapore make sure this does not change. The situation in Hong Kong today is a prime example of how the reluctance of banks to work with the industry is driving players away from the market.
It is still expensive to transport bullion in and out Singapore, but we know that this issue is being discussed at the highest levels by the Singapore Bullion Market Association. With this in mind, we are confident of lower transportation costs in the near future.
Finally, there is the important question of whether regulation is required for companies dealing with physical metals. J. Rotbart & Co. believes that some regulatory requirements are necessary. In this industry, which is based on trust and has no room for mistakes, even one rotten apple may damage it. We want to continue attracting good and honest players and we are certain our peers will agree with us that limited external overview on the market is not a bad idea.
As the first Hong Kong-based company that was accepted as a member of the Singapore Bullion Market Association, and as we are getting ready to open our new office in Singapore, J. Rotbart & Co. is thrilled with the opportunities and prospects ahead. Personally, as someone who has been deeply involved in the Singapore precious metals community for the past seven years, I am a great believer that if we can address the challenges facing us together, we will be well ahead of the curve, allowing Singapore global recognition as the preferred location for high-net-worth clients to store their wealth.
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