Hong Kong's HKMEx is planning to launch yuan denominated gold, silver and copper contracts this year.
According to William Barkshire, co-president of the Hong Kong mercantile exchange, the main objective behind the move is to establish an internationally traded benchmark contract for pricing copper, gold and silver.
He said price benchmarks that accurately reflect the structural shift in commodities consumption from developed Western nations to emerging Asian countries, such as China and India, are lacking.
"China is the world's largest copper market. However, there continues to be a mismatch between the price of copper traded domestically in China, and the international price established at the London Metal Exchange in the UK," Barkshire said.
" What China needs is an internationally traded benchmark contract for pricing copper, and that's exactly what HKMEx has set out to accomplish."he added.
At the same time, the gold and silver contracts will provide international users with exposure hedging benefits while mitigating foreign exchange risk, according to the expert.
Barkshire said Hong Kong needs to anticipate the move to a fully convertible yuan in the coming years and offer yuan-denominated commodities contracts ahead of competing financial centres such as London, which is already gaining market share against Hong Kong in the offshore renminbi spot foreign exchange space.
HKMEx has been trading two precious metal contracts since May 2011 – a 32-ounce gold futures contract and a 1,000-ounce silver contract, both denominated in US dollars with physical delivery in Hong Kong.
Courtesy : Bullionstreet
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