Hong Kong and Shanghai exchanges plan gold and silver alliance

Cities' gold and silver exchanges to start talks on deal for tie-up, allowing mainland bourse access to international market through Hong Kong

PUBLISHED : Saturday, 26 April, 2014, 1:21am
UPDATED : Saturday, 26 April, 2014, 1:21am

The Chinese Gold and Silver Exchange Society will soon kick off talks with the Shanghai Gold Exchange for a potential alliance, the president of the local gold bourse told the South China Morning Post.

This will mark another potential tie-up of the mainland and Hong Kong financial markets.

Chinese Gold and Silver Exchange Society president Haywood Cheung Tak-hay told the Post in an exclusive interview that his exchange would start talks in the next two months with the top executives of Shanghai Gold Exchange about the alliance.

"We are heading in the direction of setting up an alliance, although we have not yet decided on the details on how the two bourses would work together under such tie-up," Cheung said.

"This would be an important step to bring the gold markets between Hong Kong and mainland closer. This is also important to let the mainland gold bourse to go into the international market through Hong Kong."

Earlier this month, Hong Kong and mainland regulators announced a through-train scheme for investors in Hong Kong and the mainland to cross-trade stocks listed in Hong Kong and Shanghai from October. This would effectively be a liberalisation of capital controls on 550 billion yuan (HK$690 billion).

Commodity markets are now also talking of linking up. London Metal Exchange chief executive Garry Jones told the Post on Thursday that high-level talks are under way to form a potential alliance between the LME with the three mainland commodity exchanges in Shanghai, Dalian, and Zhengzhou.

"A tie-up with the Hong Kong markets from gold, commodities to stocks would be a short-cut for the several mainland exchanges to access the international markets. This would be quicker than letting the mainland bourse establish the international broker and client base," Cheung explained.

The Shanghai Gold Exchange was set up in 2002 by the mainland's central bank the People's Bank of China. It has 162 members across the mainland, mainly domestic traders, jewellery manufacturers and brokers to trade gold, silver and platinum.

The Chinese Gold and Silver Exchange Society trades the same products in Hong Kong. It was established in 1910 and has always been the largest gold exchange in the city.

The society's 173 members include gold jewellers such as Chow Tai Fook, Chow Sang Sang and big banks such as HSBC or Wing Hang Bank.

The alliance talk is taking place at a time when China raced past India as the world's largest gold consumer last year. Domestic gold consumption reached 1,176.4 tonnes last year, up 41.4 per cent from 2012.

Last month, Shanghai Gold Exchange officials said it would introduce a gold trading platform in the Shanghai free-trade zone in the second half of this year.

"Many people think Hong Kong would be marginalised after Shanghai became an international financial centre," Cheung said.

"However, we have seen the central government has introduced many measures to support Hong Kong to have a role to play in the internationalisation of the yuan and the opening up of the mainland bourses."