Higher gold prices no boon for pawnbrokers

Singapore

GOLD prices hit an all-time high of US$2,000 an ounce in August, and pawnbrokers report a trend of people trying to sell their gold. But in general, the pandemic is still a bigger factor in customer behaviour and transaction volume has been relatively low.

Yeah Lee Ching, secretary of the Singapore Pawnbrokers' Association, told The Business Times that while the number of customers selling their gold has increased since gold prices hit a record-high, the number of customers pawning their gold has only inched up.

Ms Yeah, who is also the executive director of Singapore-listed pawnbroker ValueMax, said that the company has seen a 10 to 15 per cent reduction in the total loan amount disbursed from its pawnbroking business segment compared to before the circuit-breaker measures were imposed.

"It was to our surprise that there has been a decrease (in the number) of customers looking for pawning services since the circuit breaker," she said, adding that the reduction in demand could be due to a combination of reduced expenditures from cancellations of overseas travels and holidays, as well as reduced household expenses due to the current "stay at home" behaviour. Government handouts to citizens and companies, too, enabled customers to reduce loans from pawnshops and reduced the "need to pawn", she added.

Ng Leok Cheng, CEO of Maxi-Cash, said the company has seen a decrease in customer visits as the company's stores were initially shuttered during the circuit breaker period. Maxi-Cash reopened 24 of its 38 stores on Apr 12.

All its stores resumed pawnbroking operations on June 2 and higher gold prices have led to some increase in pawning activities as customers get more bang for their buck, but Mr Ng said that there has been only a "slight recovery" in business.

"Customers will need to buy new items if they are to have items to pawn, which means that retail confidence must return for the long-term sustainability of the pawn business," said Mr Ng.

The pandemic hasn't yet hit the pawnbrokers particularly hard though.

For the first half of the fiscal year ended June, Maxi-Cash actually reported an 11.8 per cent increase in revenue to S$102.8 million. Improved contributions from its pawnbroking business and jewellery and branded merchandise trading businesses were offset by a decrease in revenue from the retail of jewellery and branded merchandise, and secured lending segments.

The company also benefited from rental rebates from its landlords and cash grants under the Job Support Scheme, which allowed it to book an 80 per cent increase in net profit to S$10.1 million.

ValueMax, too, reported an improvement in earnings. For H1 FY2020 ended June, the group reported a 4.1 per cent increase in net profit to S$12.8 million. But the company's revenue had fallen 10 per cent to S$95 million amid the temporary closure of operations during the circuit breaker period.

Ms Yeah of ValueMax said pawnbroking has historically tended to be a "relatively stable business without sudden spikes or drastic drops in demand".

But she is anticipating an increase in demand for pawn loans should the pandemic lengthen. Even if the pandemic eases, she said demand "might stay high for a while" as the economy gets back on its feet.

Said Ms Yeah: "With Covid-19, people may generally become more aware of environment conservation and spend on tighter budgets. These trends may lead to more value-driven consumption that (increases) the demand for pre-owned jewellery."