Capitalizing on China's gold rush

Yvonne Zhang, director of Metals Products for Asia at the Chicago-based CME Group, has been a very busy woman of late, having to city-hop in China during weekends and holidays to attend numerous seminars with gold investors.

Zhang's frequent travels are part of CME Group's efforts to expand its precious metals business in China, home to a booming gold market. One of the reasons for this growth, said Zhang, is that China's gold investors have been very proactive in expanding their knowledge of trading rules, with many even honing their investment skills at simulation trading sessions.

"China's investors don't just have a big appetite - they are also quite skillful. Investors here have a long tradition of trading gold and keeping them as a part of their investment portfolio, thus we are not here to educate them how to trade, but to hear what they need," Zhang said.

Ever since Chinese aunties pushed up gold prices with a buying frenzy in 2013, emerging institutional and individual investors in the country have been eyeing the benefits of an increasingly open China market that offers more choices, noted Harriet Hunnable, executive director of Metals Products at CME Group.

"Chinese investors, especially institutional investors, have been playing increasingly significant roles in the market. Individual investors are also having mounting demands for investing in gold as a risk-hedging tool," said Hunnable during a visit to Shanghai to attend a forum that discussed opportunities and global cooperation in the Chinese gold market.

Hunnable also pointed out that her company's Gold Kilo Futures contracts physically delivered in Hong Kong, which was launched January this year, has been quite popular among investors in China - the world's largest consumer and producer of gold - and the Far East region. The contract, which provides clients access to round-the-clock price discovery for the Asian gold market, is a supplement to the existing categories as demand for gold grows rapidly in China and the Far East markets.

Plans to cooperate with Chinese institutions are also underway at CME Group. Shen Gang, the deputy general manager of the Shanghai Gold Exchange (SGE) said that talks have taken place between the two parties regarding the listing of SGE's gold-backed products in the US derivatives marketplace. If an agreement is reached, SGE members will also be able to trade CME-listed products in Shanghai and vice versa.

SGE head Xu Luode commented that the exchange has had more partnerships with global market players since the Chinese market started to open up and that China has in recent years been looking to increase its influence in the pricing of gold. The planned launch of a renminbi-denominated gold fix - which will offer another option to market players and be complementary to the current dollar-denominated price - via the Shanghai Gold Exchange by the end of this year, looks to be one way to achieving that goal.

wuyiyao@chinadaily.com.cn

(China Daily USA 07/10/2015 page7)