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Hong Kong gold trade linked to Shenzhen; Dubai, Singapore, Myanmar next?

Section: Daily Dispatches

900 Kilos of Gold Traded After Launch of New 'Connect' System Linking Hong Kong and Shenzhen

By Enoch Yiu
South China Morning Post, Hong Kong
Friday, November 3, 2017

Nine hundred kilos of gold, worth 300 billion yuan (US$38.45 billion) swapped hands on Friday evening in the first cross-border trading under the newly launched "Gold Connect," which links the gold markets of Hong Kong and Shenzhen.

The first trades were made after a ceremony hosted by Hong Kong Chief Executive Carrie Lam Cheng Yuet-ngor and Haywood Cheung Tak-hay, president of the Chinese Gold and Silver Exchange Society.

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Under the scheme, mainland investors can trade yuan-denominated 1-kilogram gold bars in Hong Kong through one of the city's 70 exchange members in Qianhai, the special economic zone in Shenzhen designed to facilitate the development of financial services that complement Hong Kong.

Investors can opt for settlement in cash or physical gold delivery.

The Shenzhen-Hong Kong Gold Connect is the city's second such trading scheme after a linkup between Hong Kong and the Shanghai market in 2015. The new link has 70 Hong Kong companies taking part, compared with 30 in the Shanghai-Hong Kong Gold Connect.

"The Chinese Gold & Silver Exchange Society has a 108-year history and has been promoting offshore yuan gold trading in recent years," said Carrie Lam Cheng Yuet-ngor. "The new Gold Connect to start tonight, as well as the gold vault in Qianhai, will help gold traders save time and money settling gold trades. This will benefit both Hong Kong and mainland gold traders and investors."

Lam added that the new scheme would create closer ties between Hong Kong and Qianhai and credited the local gold bourse's efforts to tie up with gold exchanges in Dubai, Singapore, and Myanmar as well.

The proposed gold vault will operate from April and be able to store 1,500 tonnes of gold, allowing mainlanders who trade the metal in Hong Kong via Qianhai to gain physical delivery.

Haywood Cheung said: "The new connect will boost the internationalisation of the yuan. The Shanghai Connect has already benefited international investors to trade gold in the mainland. The new Shenzhen leg will make it easier for 2,000 jewellery makers to trade gold in Hong Kong."

While the Shanghai link allows Hong Kong investors only to trade on the mainland city's gold exchanges, the Shenzhen link now allows mainlanders to trade in Hong Kong.

This is different from the two Stock Connect schemes that linked up share markets in Hong Kong and Shanghai in 2014 and Shenzhen last year. Both allow northbound and southbound trading.

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