Rolex for casino cash fuels Singapore pawnshops

Yeah Lee Ching recalls when a lady walked into her pawnshop in Singapore and pledged a $10,000 diamond-studded gold Rolex watch to bankroll casino spending. She never came back for her jewelry.

Pawnbrokers are proliferating across Singapore as gamblers seeking short-term loans add to demand for quick cash from people struggling to make ends meet in the world’s most expensive city. The number of pawnshops in the city-state surged to 214 this year from 114 in 2008, according to a report by DMG & Partners Securities Pte. Loans disbursed by the industry jumped to S$5.5 billion ($4.4 billion) in 2013 from S$1.6 billion in 2007, government data show.

“Pawnshops are the most-frequent automated teller machines for regular gamblers,” Ivan Ho, president of Singapore Pawnbrokers’ Association, said in an interview this month. “They need capital and pawnshops offer them loans that are reasonably priced.”

Since Singapore’s two casinos opened in 2010, about 20 percent of the increase in pawnbroking activity is driven by clients raising money for gambling, said Ho, who’s also the owner of Heng Seng Pawnshop Co. The rest comes from business owners and low-income individuals who need quick cash to pay hospital bills and other unexpected costs.

“I pawn my jewelry when the need arises,” said Vikki, a businessman who runs his own security agency and asked to only be identified by his first name. “The biggest loan I got was S$70,000 to cover salaries of my staff when payments from customers got delayed.” He was speaking last week outside the ValueMax Group Ltd. pawnshop in Little India, just across the street from competitor Maxi-CashFinancial Services Corp.

Living costs

S. Pandian, a 50-year-old construction supervisor from India, was pawning a chain and gold ring at the same ValueMax shop. He said he earns about S$1,600 a month and sends most of it back to his family, making it hard to cover living costs.

ValueMax, Maxi-Cash and MoneyMax Financial Services Ltd. dominate the industry, owning almost 40 percent of all pawnshops in Singapore, according to DMG. Yeah Lee Ching, in whose shop the $10,000Rolex was pawned, is the executive director of ValueMax.

The three companies raised a combined S$103 million from initial public offerings in the past two years to fund expansion, regulatory filings show. For MoneyMax, which forecasts revenue will climb to S$100 million in two years, it was the opening of the casinos that created a market opportunity.

“In Macau, you see casinos and pawnshops,” MoneyMax founder Peter Lim Yong Guan said in an interview on June 12. “That gave us an idea.” While Macau might have been the inspiration, MoneyMax’s Singapore clientele has turned out to be mainly people seeking money for living costs rather than gambling, he said.

Soaring prices

The republic topped Paris, Oslo, Zurich and Sydney in the Economist Intelligence Unit’s Worldwide Cost of Living Survey released in March. An influx of foreign workers has contributed to competition for jobs, congested public transportation and surging home prices. The gap between the richest and the poorest Singaporeans rose in 2012 to the widest since 2007, before narrowing last year, according to government data.

The pawnbroking industry also got a boost as surging gold prices increased the amount of collateral borrowers could access, said Yeah, executive director of ValueMax, the biggest such broker by market value in Singapore. Spot gold climbed to a record $1,921.17 an ounce in 2011 before tumbling 28 percent last year.

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