Depositors in Hong Kong can now convert their idle renminbi deposits into gold.By Nick Ferguson | 17 October 2011
Hong Kong’s Chinese Gold & Silver Exchange Society officially starts trading gold denominated in renminbi today, in a bid to attract the HK$600 billion of Chinese currency sitting on deposit in the city’s banks.
Haywood Cheung, president of the 101-year-old bullion exchange, said the so-called Renminbi Kilobar Gold contracts could boost trading volumes by up to 30%, or HK$40 billion a day, during the next six months. Growth has already been strong this year, with average daily electronic transactions reaching HK$136 billion after a full-year average of just HK$31 billion in 2010.
“By attracting both local and international investors, the Renminbi Kilobar Gold is a significant step towards internationalising the renminbi,” said Cheung. “It also consolidates Hong Kong’s position as an offshore renminbi centre by providing investors with a new alternative in leveraged trading of renminbi.”
Investors who choose to convert their renminbi bank deposits into the new gold contracts can gear up their exposure to the currency by as much as 25 times. During a visit to the exchange on Friday, Cheung told FinanceAsia that this ability to use leverage will prove attractive to investors, who until now have lacked opportunities to put their renminbi to work.