Trading in mainland gold futures is on the cards for Hong Kong
after the Airport Authority (AA) confirmed recently a precious
metal depository will be opened at the Hong Kong International
Airport by the end of 2007.
The bonded depository will cover 300 square meters. The vault
will be monitored by the AA and its income will mainly come from
depositors' rents, an AA spokesman said.
Market watchers welcomed the move, saying it would help
consolidate Hong Kong's position as an international trading
center.
They also said it paved the way for the establishment of a
commodity futures market in Hong Kong, although some doubted
whether a gold futures market was a practical step for the
city.
The Chinese Gold and Silver Exchange Society (CGSE) has been
urging the government to build the depository for three years. "The
government approval is positive. It could help build Hong Kong as
the regional gold trading center," said CGSE President William
Lee.
Michael Ling, managing director of Upbest Precious Metals
(Asia), said: "The lack of a place for settlement has long hindered
the development of gold futures in Hong Kong. The gold depository
is a big leap, which could speed up the launch of the futures."
The Hong Kong government recently proposed the establishment of
a commodity futures market in Hong Kong to support the mainland's
economic boom. And gold is believed to be the first product in
their sights.
Lee pointed out the industry must be well prepared before the
exchange is formally established.
The CGSE plans to launch an electronic trading platform, which
is scheduled to open in the second half of the year.
"The platform incorporates round-the-clock online trading in
futures and spot markets, and investors will be able to get access
to the mainland and foreign exchanges," he said.
He revealed that the CGSE is in talks with the Shanghai Gold
Exchange (SGE) to study the availability of cross-regional trading.
"It depends on the opening of yuan convertibility."
But Ling said the CGSE was likely to get the SGE approval
because "there are just some technical issues left for the two
exchanges to discuss".
The Hong Kong Special Administrative Region government has not
laid down a concrete timeframe for the launch of a gold futures
exchange.
Lee said the CGSE had previously spoken to Frederick Ma,
secretary for financial services and the treasury of the Hong Kong
government. "He did not give any affirmative response, but we feel
the government supports the idea."
(China Daily January 24, 2007)