Japan, Southeast Asia look to grow platinum investment interest

Japan has long been associated with platinum innovation and investment, from platinum-based hydrogen fuel cells for the 2020 Tokyo Olympics to platinum accumulation plans for investors. The country has also been a traditional source of platinum jewellery demand but has been eclipsed in recent years by North America and now also China. Platinum bar and coin investment in Japan recorded net negative growth of 114 koz compared with negative 26,000 oz in 2021 and a positive increase of 240,000oz in 2020, according to the World Platinum Investment Council (WPIC). "Historically speaking, before China came into the market, Japan had the biggest demand of platinum in the world and we were importing a lot of platinum from South Africa and Russia," said Bruce Ikemizu, chief director of the Japan Bullion Market Association, at the China Platinum Group Metals (PGMs) Market Summit under the recent Shanghai Platinum Week. "Years ago, the Tokyo Commodities Exchange enjoyed bigger trading volumes than the New York Mercantile Exchange." "We have a national character in that we love white metal rather than glittering gold, so it has been the case that Japanese love for silver and platinum has been a very long-established culture," said Ikemizu. Gold outshining platinum in Japan The Japanese yen is presently trading at near 33-year lows against the US dollar, which has generated significant investor interest in precious metals as a store of value. Ikemizu said that while consumer preferences lean towards gold, there were opportunities for platinum to capture some interest. "Silver is already very, very popular. As soon as retailers sell physical silver, one kilo bars, 500g bars, they will disappear within an hour. I want the same thing to happen to platinum as well," said Ikemizu. "We had this past and I think especially at the moment, with gold being highest in history price-wise, platinum is still very discounted compared with gold. I am talking to investors to look at platinum, that this is really a bargain if you want to make investment in platinum. We are putting much emphasis on the prices and also the real value of platinum." The outreach succeeded in the first quarter of this year. A marked recovery in bar and coin investment in Japan - where buying was its strongest since Q2 2020 as consumers adjusted to higher platinum prices in yen terms - helped drive total investment up by 71% year-on-year to 102 koz, the highest since Q3 2021. But the Japanese market for platinum jewellery disappointed in Q1 due to headwinds including a lacklustre bridal segment, weaker television shopping channel sales from waning social distancing under COVID-19, and some inventory adjustments. These all put pressure on local jewellery manufacturing. But the WPIC outlook is still for Japanese jewellery demand to grow by 8% in 2023 from last year's 333,000oz, on the back of improving bridal sales later in the year and a recovery in tourism numbers, supported by decent exports as Hong Kong is now organising jewellery shows again. Southeast Asian growth If Japan represents a mature market for PGMs, then Southeast Asia could be the future. There is small but growing interest from countries including Singapore, Thailand, Malaysia, Indonesia and Vietnam."Southeast Asia does not know very much about PGMs because the application of PGM is pretty limited here, mostly in jewellery for wedding or platinum-set jewellery," said Singapore Bullion Market Association chief executive Albert Cheng."Pure platinum or solid platinum is pretty expensive. Because people know gold more than platinum, gold is always their first option." "Southeast Asian people are very young. In the next decade, many of them will move up to the middle class and start accumulating wealth so they have a need for making investments. We do need to make efforts to further develop this market," said Cheng. Vietnam's physical gold demand last year jumped by 37% to 59t that ranked first within the Association of Southeast Asian Nations and was comparable with the pre-pandemic level, according to the Vietnam Gold Traders Association. This offtake comprised 41t of retail investment and 18t of jewellery consumption. Vietnamese gold demand likely reached an estimated 27t in the first half of 2023, comprising 19t of retail investment and 8t of jewellery consumption.This would be down by 20% year-on-year due to Vietnam's slower economic growth - which moderated to a pace of 3.3% in Q1 after a rapid 8.0% expansion last year - but still ranking ahead of the Indonesian and Thai gold markets demand. Malaysian gold demand reached 18.5t last year, up from 14.9t in 2021 and exceeding the 17.6t in the pre-pandemic year of 2019, according to the country's statistics department. Still, demand has come down from the early 2010s - demand stood at 27t in 2013 and had fallen to 17.8t by 2016. More investor education Cheng pointed to nuances between precious metals markets in Southeast Asia that will need to be observed if platinum is to take off. For instance, the consumer preference for gold in Singapore comes in the form of physical bullion, while Southeast Asia leans toward gold jewellery. "If we are to develop the PGM investment market in Singapore or in Southeast Asia, we need to first of all educate the new investors. We need to let them know more about the platinum coins, bars and ingots, and provide such products to them." Individual buyers need to be made aware of how national customs or tax regimes for precious metals may change in the near future, to ensure they are comfortable with purchasing PGMs." "I would say that in the next few years that the key focus is still education, and education is not only for the public, but for the government too. That is the focus of our future efforts," said Cheng. Ikemizu pointed to Japan's long history of platinum investment marketing as worth emulating in Southeast Asia, where there is a paucity of information for investors about PGMs. Cheng recommended platinum retailers provide customers with a buyback price, which is a common feature in the regional gold market. "There should be a buy and sell mechanism to the public. Although the general public likes to buy jewellery for the beauty, they also care a lot about value-keeping. This is one big feature of the Southeast Asia market."

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