Chinese fund managers preparing to launch gold ETFs
24 Aug 2012
Fund managers in China are readying to launch gold ETFs after regulators raised the barrier on the product to meet growing demand for alternative investment options in the limited market. Four firms are developing physically-backed funds that track spot prices on the Shanghai Gold Exchange.
Guotai Asset Management and Hua'an Fund Management are preparing to list ETFs in Shanghai, while Bosera Asset Management and E-fund Management will launch funds on the Shenzhen Stock Exchange, local media report. Dates for the listings have yet to be announced.
The product opens the door for other precious metal ETFs in China, and could help revive investor interest in gold and boost physical consumption after a recent drop-off in demand.
Uptake is likely to benefit from a low minimum trading requirement, which is expected to be as little as one gram, helping to attract smaller investors to the market. Additional advantages over other types of gold investment vehicle include lower commission fees and no deposit requirement.
Interest in the product will see further support from attractive gold prices that are showing upside potential amid the on-going difficulties in Europe and the lingering prospect of QE3. Low volatility transmission between gold and oil also suggests it's a good time to buy.
The only gold ETFs currently on offer to Chinese investors are overseas-listed funds available under the QDII channel through four fund houses - China Universal Asset Management, Harvest Fund Management, E-fund Management and Lion Fund Management.
Domestic gold ETFs will offer lower management fees than their QDII counterparts, and will boost China's demand for the yellow metal, which has recently shown signs of flagging.
Gold demand in the world's largest consumer saw an annualised decrease in the second quarter on the back of the on-going economic slowdown and lack of a clear price direction, the World Gold Council said in its quarterly report earlier this month.
Demand for jewellery dropped 9% to 93.8 tonnes, while investment demand was down 4% at 51.1 tonnes, dragging on global growth figures. "Investment demand excluding India and China grew by 16% year-on-year to 195.2 tonnes as investors in most other regions favoured buying on price dips above taking profits," said the industry body.
Author: Orlando Bowie