Gold business in China: ICBC’s big bullion dreams.
The world’s biggest bank by market value, ICBC is the top player by volume on China’s Gold and futures exchanges, but its participation in foreign markets is limited to over-the-counter trading, which reached a total $90 billion last year. Industrial and Commercial Bank of China Ltd is seeking membership of overseas exchanges and aims to become a major global bullion market maker, a senior executive said on Monday.
Emboldened by Beijing’s ambitions to have a bigger say in global commodity prices, ICBC now has an eye on bourses such as COMEX and on joining the 11 market makers of the London Bullion Market Association (LBMA).
These quote continuous two-way bid and offer prices for gold, silver, platinum and palladium throughout the London day, providing a liquid market in which to trade.
“We hope to play a bigger role in the global precious metals market and become a major market maker, like Barclays,” Shen Shisheng, ICBC vice-general manager of financial markets, told Reuters on the sidelines of a conference in Shanghai.
Barclays Capital is among the gold fixing members on the LBMA. The newest LBMA market maker, Merrill Lynch, was appointed in January last year. ICBC became an ordinary member of the LBMA late last year, the first commercial bank in China to join the association.
Given the bank’s large trading volume, Shen said that ICBC has recently started price quotation for gold transactions on the Shanghai Gold Exchange and has begun acting as an agent for non-member clients. It has also opened offices in London and New York and plans to start price quotation in both cities soon, he said.
ICBC also wants to grow its financial products to service the full supply chain of the bullion market, including loans to miners and smelters, physical gold leasing, hedging and brokering.
“We now have banking operations in 34 countries and we need to expand our gold services and products to other major markets,” Shen said.
China’s gold markets have boomed in recent years as high inflation and poor performance in equities markets have seen investors turn to bullion as a safe-haven asset.
According to the U.S. Futures Industry Association, China was fourth in terms of volume of gold futures contracts traded in 2011.
Total trade for China’s gold futures hit 722.18 million lots in 2011, a 113% jump from a year ago, while turnover jumped nearly 180% to 2.55 trillion yuan ($401.9 billion), according to data from the Shanghai Futures Exchange.Source: Reuters
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