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The Hong Kong Mercantile Exchange will open for business on May 18 after a wait of nearly two years. The exchange will offer investors 15 hours of trading starting at 8 am Hong Kong time and spilling over into European and U.S. business hours.
The exchange debuts with a deliverable gold futures contract — setting it apart from the non-deliverable contract offered on the Hong Kong stock exchange.
Barry Cheung, Chairman of the Hong Kong Mercantile Exchange, said it was a long time coming, given the rise in the consumption of commodities in Asia and China. He said there is a “need for a platform to provide customers with tailor made futures products to allow them to manage their risks more effectively.”
The first product is a one kilogram gold contract denominated in U.S. dollars. That will be followed by a silver contract, and then another gold contract quoted in yuan, as the exchange tries to cash in on appetite for Chinese assets and interest from Chinese investors.
Mainland demand is key to the success of the exchange given that similar vehicles in Asia have failed due to the lack of volumes.
Last month, the Hong Kong exchange traded only 128 gold contracts, valued at a total of $20 million, while the Singapore Mercantile exchange traded one contract worth $50,000. In comparison three million gold futures contracts worth $480 billion were traded last month on New York’s Comex Exchange.
Cheung said the best way to boost volume is to “make sure the contract is targeted at people in the trade and designed to meet their needs.” He sees the bulk of interest coming from China. Cheung said, “Given the appetite of mainland traders to trade various kinds of contracts, we feel we will be able to offer them a platform they can trade on.”
Cheung told CNBC that the Hong Kong Mercantile Exchange offered one of the most advanced trading platforms in the world and the fees were also extremely low. “They’re very, very competitive.”
Copyright: CNBC Asia
