The Securities and Futures Commission (SFC) has approved the first gold ETF for listing on the stock exchange in the city, offering investors a new alternative to invest in gold-related products.

The regulator said the gold ETF, an exchange traded fund which tracks the price of gold, will be launched shortly to meet the rising demand in the city.

Alexa Lam, the SFC's deputy chief executive officer and executive director for policy, China and investment products, said: "We have seen growing investor interest in the commodities market and have been working with industry participants for introduction of different commodities products in the Hong Kong market."

She added that the SFC is pleased that Hong Kong now has its first retail gold ETF.

State Street Global Advisers, the money-management unit of the world's second-largest manager of exchange-traded funds, will give more details of the gold ETF today.

"Gold ETF is an alternative for investors who are interested in gold-related investment products," said Bruce Chong, managing director at Patterson Financial. He, however, added that "ETF is not quite popular among individual investors in Hong Kong."

He also cited some alternatives that investors may be more interested, such as spot gold, paper gold, shares in Zijin Mining and Lingbao Gold.

Chong pointed out that a more diversified gold-related product mix can help the city bolster its position as an international financial center in Asia.

"Hong Kong's gold ETF may attract institutional investors who are seeking investment opportunities within Asian time zones," he said.

Talking about local individual investors, Chong said they don't have much knowledge about the products, but the high inflation rate in Hong Kong may motivate them to seek commodities-related investment favorable for launching gold ETF.

He suggests that investors should be aware of the international gold pricing trend when buying the fund. "The gold prices will fluctuate following the US dollar performance and the oil prices, which may affect the fund's performance."

Gold ETF is a passive investment vehicle through which investment is made solely in gold bullion with an aim to track the price of gold.

It offers investors a chance to participate in the gold bullion market without taking physical delivery of gold. Gold ETF holds physical gold bullion in its portfolio as its sole underlying asset, which is held in trust in the vault of the custodian bank.

(HK Edition 07/24/2008 page3)