HK Taps Exchange Fund to Boost Gold Trading Ambitions

Hong Kong's Chief Executive John Lee has announced plans to boost the city's gold trading by tapping into the Exchange Fund, which serves as the city's de facto sovereign wealth fund. The fund currently totals HK$134.7 billion and is managed by the Hong Kong Monetary Authority (HKMA), the city's de facto central bank.

The HKMA is exploring the possibility of raising the Exchange Fund's gold holdings and participating in the local spot and futures market. This includes gradually transferring physical gold holdings to designated vaults appointed by the Hong Kong Precious Metals Central Clearing Company Limited (PMCC), a government-owned company that launched a trial clearing and settlement system for gold in early July.

The PMCC's gold clearing and settlement system is set to start its official operations in the first quarter of next year, with a dedicated hotline being set up to offer one-stop support for mainland overseas gold traders. The Mandatory Provident Fund (MPF) Schemes Authority will also allow for a greater range of MPF investments in gold exchange-traded funds (ETFs), and an industry association for gold is expected to be established next year.

The government aims to transform Hong Kong into a world trading centre for the precious metal, with over 20,000 tonnes of metals currently stored at designated local warehouses. To further achieve this goal, tax incentives will be rolled out to attract more traders to set up and expand their businesses in the SAR, including a half-rate tax concession for commodity trading.