Investors avoid initial gold ETF in RMB

All that glitters isn’t gold, including gold exchange-traded funds denominated in renminbi.

Investors have shied away from Hong Kong’s first gold ETFs denominated in renminbi, partly out of caution. The RMB-denominated gold ETFs introduced yesterday are the first ever launched in Hong Kong

The Hong Kong gold ETF provides returns in renminbi or yuan while tracking the performance of the London Gold Fixing Price in US dollars. It does, however, seek to hedge against the renminbi exchange rate to the dollar.

It’s a new product so investors may take time to get familiar with it, believes Song Qing, a fund manager at Lion Fund Management Co., China’s first asset manager to place money in the ETF gold funds.

The Hang Seng RMB Gold ETF was introduced on the stock exchange by a unit of Hang Seng Bank Ltd., which is controlled by HSBC Holdings Plc.

Hang Seng Bank launched the first RMB-denominated gold ETF in Hong Kong to tap the city’s pent-up but abundant renminbi liquidity.

Yesterday, the fund closed at RMB 34.90 ($5.54) per share after opening at RMB 34.85. One share equals one-tenth of a gram and 31,800 shares traded.

Secretary for Financial Services & the Treasury Prof. KC Chan said the renminbi-denominated gold ETFs are a good development of the renminbi exchange rate in the offshore market.

Prof. Chan said Hong Kong has a lot of renminbi liquidity and noted it is a policy objective of the government to encourage investors to use this liquidity to trade on the stock exchange.

He said more renminbi products to be listed will help investors become familiar with the trading system in renminbi.