China on Gold (interesting read)

Gold trading loses shine, on first day
www.chinaview.cn 2005-07-19 07:59:26

BEIJING, July 19 -- Landmark gold trading available to individual investors as of yesterday was getting the cold shoulder from local residents on the first trading day in China's financial hub, perhaps due to high costs and low profitability prospects.
"There were only two to three telephone calls asking for information, but no customers came to register," said Lu Feng, a wealth consultant at the brokerage bank's Yandang Outlet in downtown Shanghai.
The Shanghai branch of China's largest lender, the Industrial and Commercial Bank (ICBC), teamed up with the Shanghai Gold Exchange on Sunday to announce the opening of the new trading platform through its "Jinhangjia" (Gold Expert) product, marking the milestone opening of physical gold trading yesterday to individual investors.
Previously, gold trading was reserved for more than 100 corporate investor members since the launch of the Shanghai Gold Exchange at the end of 2002. The debut of paper gold trading at two other banks the Bank of China and the China Construction Bank in Shanghai followed earlier this year.
Different from paper trading trading not for delivery the gold trading allows buyers to demand the physical delivery of the gold, with expenses of only 2 yuan (24 US cents) for each kilogram.
But the situation is sluggish in branches where the service is available. "We only had three to four calls, and nobody came to us today for application," said a banking clerk surnamed Wang at ICBC's Nanjing Road in the centre of the city.
Detailed information from ICBC Shanghai branch was unavailable regarding trading in the whole city.
"We are not in the right position to say much on the product as it is only one product launched by ICBC, it is not the whole pictureand maybe it will get better when customers get to know the product," said Tong Gang, an official with the Shanghai Gold Exchange's Information Department.
According to rules set up by the ICBC's Shanghai Branch, individual investors can apply to register for gold trading at any of its nearly 60 outlets in the city, with an identification card and a registration fee of only 60 yuan (US$7.24).
But investors must have a lot of money before investing in this new business as they are required to buy at least 10 units, with each unit weighing 100 grams, in each transaction. That required more than 113,000 yuan (US$13,647) yesterday, when gold prices ended at 112.76 yuan (US$13.61) per gram at the exchange.
"The threshold is high for individual investors," said Wang Lixin, chief representative of the World Gold Council's Beijing Office, "but (by setting up a higher threshold) the regulators hope to make the market more stable rather than heatedly speculative," he said.
Investors will also need to pay fees to the brokerage bank before any deal is completed, including 0.21 per cent of the total transaction volume brokerage fee, 60 yuan (US$7.24) in registration fees and some other exchange fees, all meaning profit margins go down.
"I will not buy this as it cannot generate much return for me" said a client surnamed Li at ICBC's Luwan branch. "I prefer to invest in long-term treasury bonds that are more profitable and safer."
(Source: China Daily)