Chinese investors have a fresh array of platinum choices
If growing range of products takes off, it will provide SA’s miners with a new source of demand
The World Platinum Investment Council is pushing for new platinum products to lure Chinese investors into the metal, providing another source of demand for SA’s second-largest mineral export.
Weibin Deng, China’s head at the council, which is financially backed by SA’s platinum producers to stimulate investment, outlined plans for coins, metal-backed exchange-traded funds (ETFs) and other products, targeting the country’s burgeoning middle class.
With faltering Chinese jewellery sales, which have fallen from a 2013 peak of 2-million ounces to 1.3-million ounces in 2017 while showing signs of a further decline in 2018, a fresh demand in one of the world’s most important economies is critical.
The council was targeting the banks as a conduit for retail and investor buying of platinum products, which it was developing with a range of players in the market, Deng said.
“The banking sector is the biggest precious metal investment market for investors,” he said. About 60% of gold-bar sales in China were made by banking staff to clients. “This is our major battlefield,” Deng said.
The People’s Bank of China was one of the key institutions with whom the council was working to develop platinum products, particularly the physical metal in the form of bars, he said.
Work is under way with the Hong Kong bourse for an exchange-traded fund expected to be completed early in 2019, with a rollout into mainland China to tap into an enormous potential market.
Among the key points to clarify are minimum levels needed to qualify for an ETF on the Hong Kong bourse. A search is under way for a market maker for the physical metal and a market maker for the ETF.
The council provides research and consultancy work in the process and generates investor contacts, while communicating news about the investment products to the market.
Hong Kong’s proximity to Shenzhen, a large city in China and a jewellery-production hub, makes the platinum-backed ETF a sensible product to launch in the area. By investing in the ETF, it could serve as a hedge to their metal needs and can be swapped for physical metal.
China Gold Coin, which falls under the Bank of China and is the country’s only organisation selling Chinese bullion coins, sold platinum coins more than a decade ago. The council has persuaded it to sell a platinum coin of one-tenth of an ounce from April 2018 as a test product.
“It will be a new theme. Beijing is hosting an international gardening expo next April and they will use it to launch this coin,” Deng said.
China Gold Coin last produced platinum coins in 2005, though very little marketing and communication took place and demand was too small to justify continuing the line, he said.
The council flagged the successes of the UK’s Royal Mint with its platinum coin offerings and the American Eagle series. One of three mints in China will produce the new small coins.
Sales of platinum coins had been quite good in 2017 and 2018. That was why China Gold Coin saw an opportunity, while a very slim profit was to be made on gold coins, said Deng. “They want to develop new metal coins and attract new investors for this one.”