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Hong Kong’s wealthy move gold out of city for fear of security law

Fri Aug 07 2020



Hong Kong’s wealthy are moving increasing amounts of their gold out of the financial hub after Beijing imposed a new national security law on the city last month, precious metals dealers say.


Private sector investors have moved around 10% of their physical gold from the territory to countries like Singapore and Switzerland over the past 12 months, according to Joshua Rotbart, director of J Rotbart & Co, a gold and storage trader based in Hong Kong. provider.


The trend began last year with anti-government protests in the city and accelerated with the passage of the security law, as investors worried about political uncertainty and the state by right.


“Many customers now perceive Hong Kong to be riskier than other jurisdictions,” said Rotbart. After the National Security Law was passed, he was able to “see an immediate response from Hong Kong residents. . . ask to store it [gold] elsewhere”.


Pro-government politicians argue that the security law, which targets terrorism, subversion, secessionism and foreign influence, was necessary to stamp out protests and restore stability.


But critics are concerned about measures that undermine the legal and political autonomy promised to Hong Kong for 50 years after its transfer from the United Kingdom to Chinese sovereignty in 1997. The legislation allows Beijing to try suspects in China continental in specific cases, putting an end to the legal firewall that existed between the two jurisdictions.


“Investors are moving gold from Hong Kong to Singapore because they don’t like risk and uncertainty,” said Ronan Manly, precious metals analyst at BullionStar, a gold storage operator in Singapore. Investor concerns included “the stability and rule of law” of the city, he said.


“This could, in the minds of gold holders, snowball into concerns about the safety of bullion and even the certainty of property rights,” he added.


The price of gold hit $ 2000 an ounce for the first time on Tuesday due to Covid-19 and inflation fears.


China is the world’s largest consumer of gold, but the metal cannot be exported, making Hong Kong a more convenient place to store gold for international investors and wealthy mainlanders. The city also serves as a channel for gold entries into mainland China.


Peter Fung, head of transactions at Wing Fung Precious Metals, said investors in Hong Kong buy gold based on international market movements and not to protect themselves from concerns about the future of the dollar peg from Hong Kong to its American counterpart.


But Mr Rotbart said that while he did not think the political risk had changed significantly in Hong Kong, many of his mainland Chinese clients holding gold in the territory now saw little difference between the city and mainland China. from a political or legal point of view.


These clients had started to “think of Hong Kong as onshore and they want their gold offshore”.


Some customers were also concerned about an increase in crime in a city generally known for its safety, with burglaries increasing 47% in the first half of 2020, from 786 last year to 1,156 this year.


A Hong Kong commodities analyst, who did not want to be named due to the sensitivity of public comments on the security law, said investors were worried about what would happen if they stepped aside. wrong side of the authorities in a dispute. The increase in trade tensions between the United States and China was also of concern.


“The problem could be: if I have a dispute with a [Chinese] public company, in which direction will the legal decision go and how could this affect my assets, [or] what if the United States goes crazier? Said the analyst.



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Thursday, September 17, 2020
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