The Chief Executive’s 2024 Policy Address proposed building an international gold trading centre and a commodities trading ecosystem. On 20 October, Financial Secretary Paul Chan explained the ideas and next steps in a blog post. The key points are summarised below.
Why develop a gold trading centre
- Gold is at once a commodity, a reserve asset and an investment product, and its pricing differs from ordinary commodities.
- Hong Kong is close to the two major gold-consuming markets of the Mainland and India, and its gold imports and exports rank among the highest in the world. The article notes that the compound annual growth rate of 99 tael gold turnover at the Society exceeded 18% over the past decade.
- Some investors want to store gold in different regions, driving demand for world-class storage facilities.
Next steps
- Step 1: Increase local gold storage facilities and expand supporting businesses such as trading, insurance and logistics.
- Step 2: Build on this to expand related derivatives such as collateral, lending and hedging, gradually forming a complete ecosystem.
- The Financial Services and the Treasury Bureau set up a working group including industry members to propose improvements to market trading mechanisms, and will then explore closer links with the Mainland gold market.
Commodities trading ecosystem
The article notes that commodities trading drives industries such as trading, shipping, logistics and warehousing, and creates demand for financial services such as risk management and hedging. The short-to-medium-term focus is attracting commodity trading companies to set up headquarters or regional offices in Hong Kong and studying supporting measures such as tax. The London Metal Exchange, owned by HKEX, also said it is studying approved warehouses in Hong Kong.