Latest investment frenzy sparks wild swings in gold ETF
An exchange-traded fund (ETF) that owns gold companies has become the latest target of frenzied trading on the mainland as investors pile into corners of the market seen as resilient to the country’s economic challenges.
Trading in the ChinaAMC CSI SH-SZ-HK Gold Industry Equity ETF was halted until 10.30am yesterday to protect investor interests, China Asset Management said. It was the second trading suspension for the product since last Tuesday.
The decision came after the fund’s premium over its underlying assets increased to more than 30 per cent as of April 3, the highest on record, data compiled by Bloomberg showed.
The ETF’s price had gained by more than 40 per cent in the past four sessions before falling by 10 per cent after trading resumed yesterday.
The ETF fervour is a fresh example of yield-hungry investors flocking to pockets of market strength as deepening property woes, volatile stocks and falling deposit rates reduce their options. The enthusiasm about products tied to gold, which has staged a record rally in recent weeks, also shows a desire to park money in a sector seen relatively immune to a struggling economy.
“Gold is trading at an all-time high, and gold ETF demand has surged in the past week with almost US$600 million of net inflows into gold ETFs globally,” Bloomberg Intelligence analyst Rebecca Sin said. “Demand in mainland China could continue as investors look to diversify their holdings with commodities and foreign ETFs.”
Gold, long a favourite among family-run investors, has hit a procession of records in recent weeks on expectations of US interest rate cuts and amid rising geopolitical tensions. China’s central bank is a big buyer, having bought the precious metal for its reserves for a 17th consecutive month in March.
Shares of Chinese gold miners have also produced stellar gains this year.
Zijin Mining Group and Shandong Gold Mining have both risen by more than 50 per cent from their respective lows earlier in the year. The two stocks have entered overbought territory, based on technical indicators.