Rising demand for gold that has sent prices to a nine-year high will boost Singapore's export outlook.
The precious metal has, for most of this year, bolstered non-oil domestic exports (Nodx) against the coronavirus-induced collapse in global demand for goods.
Gold spot prices rose above US$1,800 an ounce on Wednesday, a day after inflows into exchange-traded funds (ETFs) - mostly in North America and Europe - surpassed the annual record set in 2009.
Most ETFs track the London Bullion Market Association PM gold price and keep the physical metal in the form of London Good Delivery bars. So, as more ETF units are sold, the funds have to increase the amount of the bars in physical gold.
ETFs tracking the metal have accumulated an additional 655.6 tons of gold so far this year, according to estimates compiled by Bloomberg.
Gold ETF holdings stand at 3,234.6 tons.
That increase in physical holdings by funds translated into demand for the precious metal held in Singapore vaults. Enterprise Singapore said non-monetary gold exports accounted for about 70 per cent of the growth in March's Nodx.
The increase in the allure of gold also helped the stock market here by boosting turnover in a period when most investors were staying away from new investments.
Singapore Exchange data showed that SPDR Gold Shares were the most traded ETFs in the first six months of this year, and also topped other ETFs in one-and three-year total return - a key valuation for investment decisions.
It is not surprising to see gold glowing brighter amid a crisis but the shift in the source of demand from the East to the West is adding to the bullish outlook.
Gold has always been viewed by investors as a store of value and a safe haven from market turmoil.
When a recession hits and central banks go on a rate-cut overdrive, a large part of the usual low-risk bond market becomes worthless in terms of yield. Gold becomes the preferred alternative investment for risk-averse investors who still want to get a return.
Bullion ETFs also provide a compliance shield for some institutional investors such as pension funds and insurance companies that are not allowed to hold physical gold.
However, the recession caused by the pandemic has been different in many ways from the usual business-cycle slumps.
As countries went into lockdown, retail sales of all discretionary items collapsed.
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US imports from Asia increased to 1.27 million TEU in June, up 9.5 percent from May, reflecting the spurt in consumer demand generated by the reopenings of stores and restaurants in some states.
Imports from China, meanwhile, totaled 855,722 TEU, up 13.8 percent from May, according to PIERS, a JOC.com sister company within IHS Markit.
Higher imports, coupled with 86 blank sailings in the trans-Pacific in May and June, sent spot rates from Asia spiking by more than $1,000 per FEU to the West Coast and almost $700 per FEU to the East Coast.
However, the escalation of imports and spot rates in the largest US trade lane has likely peaked for now because some states that reopened their economies in May are considering new shutdowns as coronavirus disease 2019 (COVID-19) cases nationwide surged to over 3 million this week. This could dampen consumer purchases of back-to-school, Halloween, and possibly holiday season merchandise as retailers enter their busiest time of the year.
Year-over-year imports from Asia, especially China, remained in negative territory in June despite the month-on-month gain from May. US containerized imports from Asia declined 3.7 percent from June 2019, but that was a noticeable improvement from the 16.5-percent decline in May imports from May 2019, according to PIERS.
US June imports from China, while higher month on month, were down 0.9 percent from June 2019. Still, that was an improvement from the 16 percent decline in imports in May from May 2019. China continues to underperform the rest of Asia because of the two-year-old US-China trade war.
Aggressive capacity management pushes spot rates higherCiting the canceled sailings in May and June that were reported this week by Sea-Intelligence Maritime Consulting, non-vessel operating common carriers (NVOs) say spot rates in the Asia-US trade reached a 10-year high because carriers reduced total capacity in the trade below demand. In the first week of July, spot rates were pushed higher by general rate increases (GRIs) as well as peak-season surcharges.
The West Coast spot rate from Shanghai last week was $2,920 per FEU, up from $1,724 per FEU on April 30, according to the Shanghai Containerized Freight Index that is published in the JOC Shipping & Logistics Pricing Hub. The East Coast rate was $3,459 per FEU, up from $2,773 on April 30.
The trend of US imports from Asia and China has been choppy in recent months as the economy recovers in fits and starts. Year-over-year imports from Asia declined 18.3 percent in March, 1.1 percent in April, 16.5 percent in May, and 3.7 percent in June, according to PIERS. US imports from China declined 40.1 percent in March, 10.4 percent in April, and 16 percent in May before the slight dip in June.
The June import spike from Asia, which has extended into the first two weeks of July, was due to inventory replenishment by retailers, seasonal imports such as back-to-school merchandise, and continued strong movements of personal protective equipment and other medical supplies, according to NVOs. However, it appears that imports could pull back as early as next month if back-to-school sales disappoint and retailers are forced to shut down again.
Global Port Tracker, which is published monthly by the National Retail Federation and Hackett Associates, projected in its July edition that imports will decline 13.3 percent in August and 12.3 percent in September from the same months last year. But the forecast says the year-over-year declines will moderate to 9.9 percent in October and 0.6 percent in November.
Contact Bill Mongelluzzo at email@example.com and follow him on Twitter: @billmongelluzzo.
Read original news: https://www.joc.com/maritime-news/container-lines/us-store-reopenings-lift-asia-imports-june_20200709.html