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Hong Kong begins trading bullion in yuan

Hong Kong's Chinese Gold & Silver Exchange Society begins trading gold quoted in yuan

Hong Kong’s Chinese Gold & Silver Exchange Society has begun trading gold quoted in yuan, boosting the city’s status as an offshore hub for the currency, Bloomberg reported. The contract may generate as much as HK $6 billion ($770 million) in trades a day, exchange president Haywood Cheung said. The daily bullion trading volume at the society, which has 171 active members, has jumped to HK $136 billion this year from last year’s HK$31 billion on appetite for gold as a haven from stock declines. “There’s triple demand for this yuan product.” said Cheung on Oct 14. “Investors can enjoy the bull market in gold, the yuan’s appreciation and hedge gold denominated in other currencies against the yuan.”

Chinese vice Premier Li Keqiang pledged the nation’s support for yuan business in Hong Kong two months ago. The city’s richest man, Li Ka-shing, sold Hong Kong’s first renminbi shares in April and the city’s bond sales in the currency have more than tripled this year. Yuan deposits in the former British colony surged 93% this year to a  record 609 billion yuan ($96 billion) in August. “It’s part of a larger trend in Hong Kong to increase investments priced in renminbi,” said Zhang Qiang, an analyst in Shanghai at Haitong Futures Co, China’s largest futures brokerage by registered capital. “It’s a good proposition for investors who want exposure to both gold and renminbi, however this would depend largely on the two moving in tandem.”

Yuan Appreciation
The contract traded at 346.47 yuan per gram, or the equivalent of $1,690.80 an ounce, according to data on the society’s website. In Hong Kong’s offshore market, the yuan advanced 0.3% to 6.4213 per dollar, a 0.8% discount to the onshore spot rate. The currency rose 0.1% in Shanghai to 6.3726. 25 members will participate at the initial stage, Cheung said, adding that banks and jewelers had pushed to start the contract.

The society’s members include Chow Sang Sang Holdings International Ltd, the biggest Hong-Kong-listed jewelry maker and retailer, as well as HSBC Holdings Plc, the city’s biggest lender. Meanwhile, BOC Hong Kong Holdings Ltd and Wing Hang Bank are the clearing agents. The yuan in Shanghai will advance 5.1% to 6.06 by the end of 2012, as per estimates. The Europe’s debt crisis triggered a 2.1% fall in the offshore yuan rate in Hong Kong last month. The yuan is a denomination of China’s currency, the renminbi.

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