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Without waiting for Beijing's approval, banks in Guangzhou and several other
mainland cities have begun retailing gold bars to investors eager to seek
alternatives to China's relatively low interest rate returns and battered stock
markets.
Mainland retail investors, who have long held gold in special esteem, have
responded by flocking to banks in such numbers that one of them had to keep its
doors open after office hours.
Beijing launched the Shanghai Gold Exchange and allowed gold trading to
institutional investors and industrial end-users in October 2002 with a promise
from the People's Bank of China that ``in time'' individuals would also be
allowed to trade gold.
However, some commercial banks, looking for an edge in the country's
increasingly competitive banking market, decided to quietly start selling gold
even before the central bank gave its formal okay.
It has hardly been quiet, however. According to the Guangzhou-based Yangcheng
Evening News, the city's residents flocked to buy the precious metal
after local branches of China Merchants Bank set up counters to sell gold bars
to individuals a week ago.
The move followed similar decisions by banks in five other cities.
Mainland consumers, like people in many other countries, have long considered
gold to be a hedge against uncertain times and a powerful status symbol. As a
consequence, gold jewellery has long been a big seller.
On September 22, the first day Merchants Bank offered individual gold sales, the
bank's Guangzhou branches reported brisk business. At one bank, the queue of
would-be buyers was so long that the bank was forced to extend its opening
hours. Over the first four days, the bank sold 49 kilograms of gold bars, with
one buyer putting down more than 800,000 yuan (HK$754,400) for a single
purchase.
The bank's offer price is based on gold quotes from the London Metal and
Shanghai Gold Exchanges.
Though some analysts claimed the Guangzhou gold rush suggests the yellow metal
will soon outstrip all but stocks as the favourite investment of Chinese
savers, others dismissed that as marketing hype.
Gold bars are much cheaper on an ounce-for-ounce basis than gold jewellery, said
a senior analyst of Guangdong Yuebao Gold Investment Corporation in Guangzhou,
which is one of the 108 trading members of the Shanghai Gold Exchange. Since
there's no easy way for individuals to sell gold bars, he said it would be some
time before investors began to speculate in it.
``Without frequent buying and selling, it can hardly be called an investment
market,'' said the analyst, who would only give his surname as Hua.
He said he believed gold trading would become more commonplace as the market
develops.
olivia.chung@globalchina.com
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