Barry Cheung, chairman of the Hong Kong Mercantile Exchange, displays a mock gold bar at the Foreign Correspondents' Club yesterday. The Hong Kong Mercantile Exchange plans to start offering gold futures and aims to begin the trading in the first quarter of 2010, Chueng said. Bloomberg News

HONG KONG: The Hong Kong Mercantile Exchange aims to debut with a gold futures contract by January, the company's maiden offering as it seeks to take advantage of rising investor demand for the metal, which traded yesterday at a record price.

"We foresee Hong Kong establishing benchmark pricing of gold in the Asian time zone," Chairman Barry Cheung said at the Foreign Correspondents' Club yesterday.

"Priorities changed" from an initial plan to begin business with a fuel-oil contract amid a shift in customer interest, Cheung said.

Gold has surged to an all-time high, driven by a weaker dollar and mounting investor concern that increased government spending worldwide to combat the global recession will debase paper currencies and fuel an increase in inflation.

Nonetheless, "Asian markets will still follow international markets for the time being" for gold, said Qu Mingyi, a dealer at Bank of China in Shanghai. "It's not like copper, because speculation and investment interest in gold is higher," he explained.

During Asian hours, gold futures are traded in yuan on the Shanghai Futures Exchange and in dollars on the Comex division of the New York Mercantile Exchange. Hong Kong Exchanges & Clearing also began offering futures trading on October 20, 2008. Hong Kong Mercantile's planned contract is denominated in dollars.

Gold futures in New York surged as much as 1.4 percent to $1,117.80 an ounce yesterday, taking gains this year to 26 percent. The advance has come as the Dollar Index, which tracks the currency against those of six major trading partners including the yen and the euro, has declined 8 percent.

The new, 32 troy ounce contract will provide mainland investors with a means to hedge their investments safely, and without draining liquidity away from other markets, Cheung said. The contract needs regulatory approval from the Hong Kong Securities and Futures Commission.

The Hong Kong Mercantile Exchange is 15 percent held by Reliance Money, owned by billionaire Anil Ambani, according to an October 14, 2008 statement from Reliance Capital, which owns the Indian stock-broking unit.

A list of Hong Kong Mercantile shareholders and board members will be released at the end of the month, Cheung said yesterday. About 40 percent of the shareholders are Chinese State-owned enterprises in related industries, he said.

Bloomberg News

(HK Edition 11/12/2009 page3)