Hong Kong stock exchange to begin gold trading in Shanghai

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Members of the century-old Chinese Gold & Silver Exchange Society in Hong Kong should be able to start trading the yellow metal in Shanghai from March next year, allowing them to tap into mounting demand on the Chinese mainland, the world’s leading gold consumer.

The CGSE has been accepted by the Shanghai Gold Exchange as a strategic trading member, allowing CGSE members to do business on the main and international boards of the Chinese exchange, said Haywood Cheung, president of the CGSE.

Cheung said the CGSE was building a system to link into Shanghai trading, which was expected to be ready in March next year. Its members would be able to trade for themselves and for clients.

Physical gold traded on the Shanghai exchange and delivered into the mainland market is subject to full rebate of a 17-percent value-added tax, cutting the cost of imports.

The connection between the two exchanges will also benefit the CGSE’s plan to set up a trading floor and bonded warehouse for gold in a free-trade zone in Qianhai, in Shenzhen city of Guangdong province, home to thousands of jewelry makers.

The trading floor and a bonded warehouse able to hold 1,500 tons of gold would be ready in the first half of 2017, Cheung said. Before that, the CGSE would rent a three-story building in Qianhai as a temporary site to start trading and warehousing in March 2015.

“The Qianhai operations would increase China’s gold trade,” Cheung said, referring to imports and re-exports.

Sixty-eight out of 171 CGSE members have registered to set up operations in Qianhai to trade products listed on the exchange in Hong Kong, Cheung said.

They could take orders from clients on the mainland and overseas who held accounts in Qianhai at the exchange’s clearing banks, he said.

Mainland clients would be able to trade products priced in US dollars and Hong Kong dollars and foreign investors would be able to hedge yuan in their gold trades, Cheung said.

The exchange in Hong Kong currently trades gold and silver priced in the US dollar, Hong Kong dollar and yuan.

Foreign banks would be able to do inventory financing for gold in the Qianhai bonded warehouse, Cheung said. The CGSE would manage the warehouse and issue stock warrants.

Physical gold for the Qianhai trade would be imported through 15 banks currently authorized by Beijing as importers.

Henry Sapiecha

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