Asia Gold-Turkey gains SARS advantage over SE Asia jewellers
Mon May 12, 2003 01:18 AM ET
By Kathleen Kearney
HONG KONG, May 12 (Reuters) - Southeast Asian gold jewellery manufacturers who have secured lucrative markets for their products in the Middle East could be on the verge of losing ground to Turkey's vibrant industry, bullion traders said.
The move to source more from Turkey comes not from business factors such as price, design and quality or supply reliability, but from deadly Severe Acute Respiratory Syndrome (SARS) that has swept across East Asia.
"Usually gold and sometimes gold jewellery is hand carried and now one or two Middle East countries have but a ban on Hong Kong and Southeast Asian travellers," said C.T. Ng, director and head of bullion, Asia, for Standard Bank London and based in Singapore.
"This has affected our turnover, and I hope that we can have a solution by mid-May," Ng said.
Saudi Arabia and Bahrain have barred visitors who had visited China, Hong Kong, Taiwan, Singapore and Vietnam in the previous 10 days. Last week, six other Gulf states formally proposed a formal travel ban on visitors from the same SARS affected areas.
SARS originated in China, hit Hong Kong in March, and was then spread around the world by air travellers.
Singapore, the entrepot for much of the bullion trade in southeast Asia, is feeling the impact of SARS on the economy and the gold trade in particular.
"It has certainly affected our turnover. April has been half of the normal volume," Ng said.
TURKISH RIVAL
Malaysia and Thailand are the main exporters in the region of gold jewellery to the Middle East.
Malaysia jewellery manufacturers sell about 2.8 billion ringgit (US$700 million) to the Middle East each year, said Joseph Ng, country manager of MKS Precious Metals Sdn Bhd in Kuala Lumpur.
"The Middle East market is subdued but some Malaysian manufacturers are still traveling there, maybe not as much, but on a weekly basis," Ng said.
With the ban or restrictions on travel, Middle East countries were sourcing more jewellery from Turkey and this could mean a longer term loss of marketshare there.
"Turkish jewellery manufacturers are aggressive in the Middle East. Their workmanship is very good...they are certainly a force to be reckoned with," Ng said.
But Ng and others in the industry wonder if the downturn in Middle East buying and around Asia wasn't the result of other factors.
"We have seen a big fall in price and a weaker dollar," Ng said, referring to gold's fall from US$388 to US$322 an ounce in February through May.
"That means we have seen an increase in purchasing power but this is not translating into higher prices or increased sales," Ng said, adding this was true for the Middle East as well as Malaysia.
Gold struck a high of US$388.50 in early February in the nervous trading ahead of the start of the war in Iraq. But it slid steadily after that, tracking currency or equity markets rather than performing as a safe-haven investment.
The price of the yellow metal has soared in the past two weeks, rallying in line with the euro. This means that gold has performed again like a currency, while little additional demand for bullion has been seen.
Premiums for physical gold have trended just above par in Singapore at an US$0.10 to US$0.20 an ounce, dealers said.
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