Hong Kong Bourse Revamps Gold Futures Targeting China’s Wealth

Eduard Gismatullin | March 3, 2016

Hong Kong Exchanges and Clearing Ltd. plans to revamp its gold futures, targeting Chinese investors after ending the previous contract a year ago.

The new contracts will be for physical delivery denominated in yuan and U.S. dollars,said Romnesh Lamba, the co-head of market development at the bourse. The previous contract, which was started in 2008, was cash-settled and quoted only in U.S. dollars. It was suspended after gold pricing was transferred to an electronic auction on March 15 from a century-old procedure.

Prompted by stock-market volatility and economic growth concerns, consumers in China, the world’s largest consumer of the metal, are expected to buy more gold this year to store value, according to the World Gold Council. The Hong Kong exchange will be competing with CME Group Inc., the world’s largest futures market, and ASX Ltd., Australia’s biggest exchange group, in developing gold contracts to capture Chinese clients.

“There is more demand for physical delivery for gold,” Lamba said in an interview on Wednesday without elaborating when the futures will be offered. “We are in the mode where we’d like to do more product development.”

The Shanghai Futures Exchange has a gold contract and the Shanghai Gold Exchange plans to start a yuan-denominated gold fix on April 19. The bourse already lists products in gold, silver and platinum.

Lamba said the move is part of HKEx’s strategy to build Hong Kong into a wealth management center for mainland investors.

“They definitely have interest in gold products,” he said.

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