HKEx’s relaunch of gold contracts unlikely to succeed
Plenty of investment options for those wanting to trade the precious metal
Hong Kong Exchanges and Clearing (HKEx) plans to launch gold futures again but there is reason to doubt whether the third such attempt will be any more successful than two ill-fated predecessors.
The local bourse has launched gold contracts twice in the past two decades but they attracted little trading.
HKEx chief executive Charles Li Xiaojia said last month the exchange planned to launch gold futures contracts denominated in yuan but did not provide further details.
It scrapped trade in US dollar gold futures in March last year after they failed to attract much interest from market participants following their launch in 2008.
The Hong Kong Futures Exchange, now a unit of HKEx, launched a gold contract in the 1980s but trading was scrapped in the 1990s due to a lack of interest.
HKEx has traditionally been strong in stock trading. It was the world’s largest initial public offering market last year and the eighth-largest exchange in terms of total market capitalisation of companies listed on the exchange.
The first place investors wanting to trade shares think of is probably the stock exchange. And the local bourse’s monopoly status as the only exchange to offer stock trading gives it quite an advantage.
However, when it comes to trading gold, there are many trading channel available already. Investors can trade gold contracts or products at banks, gold trading firms or the Chinese Gold and Silver Exchange Society. With so many choice for investors, HKEx will find it hard to compete.
Li says he is confident the relaunch will work because the new contract will be launched in yuan, not US dollars.
However, the Chinese Gold and Silver Exchange Society already has yuan-denominated gold contracts in Hong Kong, giving it the first-mover advantage.
HKEx’s proposed relaunch of gold contracts risks becoming a sorry case of deja vu.
