Shanghai Futures Exchange launches gold trading

SHANGHAI (XFN-ASIA) - The Shanghai Futures Exchange (SFE) started trading gold futures today, officials said.

The exchange marked the occasion with an opening ceremony before trading several types of gold contracts.

"Launching gold futures is important to China's futures and financial market development," said Shang Fulin, the chairman of the China Securities Regulatory Commission.

Analysts said the new futures product is a crucial step in the development of China's markets and offers new channels for investment.

China is the world's largest consumer of gold, and the third largest gold producer. Chinese manufacturers account for 9.2 pct of world gold consumption, Shang said.

The exchange has set the contract size at 1,000 grams with the minimum margin at seven pct of the contract value. Individual investors are not allowed to participate in deliveries.

Trading gold contracts will provide some investors a new investment channel and help soak up some of the liquidity that has helped drive up inflation.

"The launch of gold futures is very welcome as investors are eagerly looking for new investment tools given the stock market's high valuation and volatility, and the property market is under severe control," Hu Yanyan, a gold futures analyst with Shanghai Jiuheng Futures Brokerage, said.

Ahead of the official launch, gold futures were traded on a trial basis from Jan 2 to Jan 8.
The bourse yesterday set the benchmark price for gold futures contract at 209.99 yuan per gram after reviewing the trial results.

The new contracts will also help companies hedge risks.

"China has a huge need for commodities. Further opening of the futures market helps manufacturers hedge risks and will improve the overall competitiveness of Chinese companies," Hu said.

China's gold output rose 7.15 pct year-on-year to 240.08 tons in 2006, with production concentrated in the provinces of Shandong, Henan, Fujian, Liaoning, Hunan and Shaanxi.

The SFE, which currently trades copper, aluminum, zinc, natural rubber and fuel futures, won regulatory approval to trade gold futures in September.

The Shanghai Futures Exchange expects to launch silver futures following the gold futures, Huo Ruirong, a deputy executive officer with the exchange, told reporters earlier. The bourse has also applied to regulators to trade in steel futures.

(1 usd = 7.3 yuan)