Third time lucky for Hong Kong bourse as gold futures trading gets off to a glittering start

The two new gold futures has over 29,074 contracts in their first seven weeks of trading, which has helped stock brokers to diversify their income source.

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In this Tuesday, July 22, 2014, file photo, gold bars are stacked in a vault at the U.S. West Point, in West Point, New York. Photo: AP

Published: 2:46pm, 27 Aug 2017Updated: 10:13pm, 27 Aug 2017

Hong Kong stock exchange’s successful launch last month of gold futures was a boon for the city’s beleaguered brokers, offering the small-and-medium firms that are feeding off the crumbs of the bourse extra trading activity and fee income, at a time when equities transactions have slowed to a trickle.

“The gold futures launched last month was a good beginning,” said Alfred Yeung Ping-kwan, founder and chairman of Glory Sky Group, a mid-tier broker and market maker for the yuan-denominated and dollar-denominated gold futures products in the city. “This is still far from a huge success like in the US, but at least we have taken a good start with a new product at the stock exchange.”

It’s third time lucky by the Hong Kong stock exchange, in its attempt to introduce gold futures trading, as it seeks a broader selection of investment options to cement the city’s role as Asia’s financial centre.

“The more the products, the more income for brokers,” said Yeung. “We would like the HKEX to introduce more products. We all need to diversify our income sources,” said Yeung.

Hong Kong Stock Exchange’s chief executive officer Charles Li Xiaojia at the HKEX Gold Futures launch ceremony at One and Two Exchange Square in Central on July 10. Photo: SCMP / Jonathan Wong

The first attempt was made during the 1980s by the Futures Exchange -- now a unit of the Hong Kong Exchanges & Clearing Ltd, or HKEX -- but scrapped in the mid-1990s due to lacklustre interest. The exchange’s previous attempt, made at the height of the global financial crisis in 2008, again met with a dismal end when transactions almost trickled to nought, forcing for the contracts to be scrapped in March 2015.

This time around, trading has picked up, along with a rise in the price of precious metals, as investors sought sanctuary amid increasing political instability in the US and around Asia, and while valuations of global equities looked excessive.