Submitted by Ronan Manly of BullionStar.com
In an interesting development on Wednesday 12 September, the Shanghai Gold Exchange (SGE) launched trading of a new Chinese Gold Panda Coin contract on the SGE trading platform. With the addition of this listing, the SGE now offers physical trading of these famous Chinese gold bullion coins alongside its extensive range of physical gold bar and ingot trading contracts. As a reminder the Shanghai Gold Exchange is the largest physical gold exchange in the world, and nearly all gold in the Chinese gold market passes through the SGE.
Ji Jiayou from the Chinese central bank at the SGE's Gold Panda contract launch
The trading unit of the new Gold Panda coin contract is 30 grams which corresponds with the current weight of the largest denomination of the Gold Panda coin, i.e. 30 grams.
SGE Trading to facilitate Price Discovery
Launched in 1982, the Chinese Gold Panda used to be produced in troy ounce weight denomination up until 2015 (such as 1 troy ounce and 0.5 troy ounce weights). Then from 2016 onwards, the Gold Panda switched to using metric weights, and is now produced in a 30 gram weights, 15 grams, 8 grams, 3 grams and down to a 1 gram weight. All Gold Panda coins have a gold purity of 99.9%. Chinese Gold Panda coins are produced by China Gold Coin Corporation which is fully-owned by China's central bank, the People's Bank of China. The actual fabrication of the Gold Panda coins takes place in Shenzhen Guobao Mint which is owned by China Gold Coin Corporation. China Gold Coin Corporation also coordinates marketing and distribution of gold panda coins on the international market.
Chinese Gold Panda coins are simultaneously legal tender in China as well as being known as commemorative coins. As the SGE said in its announcement announcing the new Gold Panda contract listing:
"The Chinese Panda Gold Coin is the legal currency of the People's Republic of China issued by the People's Bank of China (PBoC). It has the dual attributes of national authority and product investment."
According to the SGE, trading of this new gold panda contract will expand the overall customer base of the Gold Panda, allow the Gold Panda coin to play a greater role in China's investment gold market, and provide diversification benefits for investors, as well as centralise and improve price discovery for the coin. It will also crucially integrate the gold panda coin market into the wider Chinese gold market through the SGE.
Launch of the Gold Panda coin contract on the SGE: 12 September 2018
Trading of the 30 gram Gold Panda Coin
Trading details of the new Chinese Gold Panda coin contract are as follows. The contract is a spot trading contract with a trading unit of 30 grams. The price is denominated in Yuan per gram. The minimum price movement is 0.01 yuan /gram. The lot size is 1 unit. The largest single bid quantity is 1000 lots. Delivery method is physical delivery, and delivery time is T+0, i.e. same day. Transactions are executed by matching the prices of buyers and sellers. Trading times for the Gold Panda contract are the same as SGE's standard trading hours which as 9:00 - 11:30 (morning), 13:30 - 15:30 (afternoon), and a night trading session of 20:00 - 02:30 (i.e. 2.30 am the next morning).
Given that the new contract has a trading unit of 30 grams (which was the trading unit approved by the People's Bank of China), this means that only the standard Gold Panda coins produced in either 2016, 2017 or 2018 would be eligible for trading, and only in the 30 gram weight. But for this contract listing, there are no different between release years, editions or imagery on the coins (2016, 2017 or 2018), and they are traded under the same contract.
Coins produced in 2015 or earlier, which were manufactured as 1 ounce Gold Pandas would not be eligible. Each year the Chinese Gold Panda bullion coins feature different imagery of pandas on the coin's reverse of the coin, but with a consistent image of the obverse face of the coin, which is the Hall of Prayer for Abundant Harvests in the Temple of Heaven in Beijing. Examples of the 30 gram Chinese Gold Panda coin designs can be seen on the BullionStar website from 2018, from 2017 and from 2016.
Another factor which facilitated and eased an exchange listing, according to the SGE, is the fact that since 2012,Gold Pandas transactions have been exempt from VAT in China. For trading the new Gold Panda contract, this in practice means that those who are qualified for the Gold Panda's tax exemption, including individual customers and institutional clients of the SGE can participate. Clients without such as tax exemption, can, according to the SGE, apply to China Gold Coin Corporation for tax exemption.
The first transaction in the new Panda Gold Coin 30g spot contract came in at 278.8 Yuan/gram when trading opened on 12 September. Trading data for the new contract, under the contract symbol 'PGC30g' can be seen in the Daily Trading Report on the SGE website. An impressive 275 kgs of gold panda coins were traded on the first trading day 12 September, with a more modest 43 kgs of coins traded on the following day 13 September.
A Full Launch Ceremony - Chinese Style
On launch day, 12 September, the SGE and China Gold Coin Corporation held a full launch ceremony in Shanghai with speeches from senior PBoC, and SGE staff in front of 200 guests and assorted dignitaries from the Chinese government, Chinese commercial banks and representatives of the Shanghai Free Trade Zone. Short videos of 3 Chinese news reports covering the SGE's launch ceremony for the Gold Panda contract can be seen on the SGE website's media page, here and here.
Guest speakers at the Gold Panda coin contract launch, 12 September, Shanghai
Interestingly, one report on the launch ceremony, (translated from Chinese), concludes with the following paragraph:
"After the ceremony, the Shanghai Stock Exchange, the Shanghai Gold Exchange (SGE) and China Gold Coin Corporation signed a memorandum of cooperation on the development of the Panda General gold coin ETF. The Shanghai Stock Exchange and the Shanghai Gold Exchange signed a memorandum of understanding on Shanghai gold development cooperation."
Does this mean a new Gold Panda backed Exchange Traded Fund (ETF) is in the works to be launched by the Shanghai Stock Exchange, Shanghai Gold Exchange (SGE) and China Gold Coin Corporation? It looks possible.
Two weeks prior to the launch on 29 August, the SGE also held a training seminar for the Gold Panda coin's listing which was attended by 79 SGE member companies including commercial banks, securities dealers and bullion companies, which covered trading rules, delivery procedures for the coin (since it's a physically delivered contract), and tax policy / tax exemption.
Lastly, a number of media reports about the new Gold Panda SGE contract claims that it's the "only gold coin product in the world to be traded on an exchange market". For example a report from China focused website GBTimes here states that. However, this is not true. In South Africa, the famous Krugerrand gold bullion coin is listed and trades on the Johannesburg Stock Exchange (JSE) for a long time now. As the JSE website states:
"The JSE offers trading in Krugerrands through a well-regulated secondary market and are traded in the same way as any listed Equity Market instrument, with prices being quoted on the various types (weights) of coin."
Trading of Krugerands on the JSE is also documented in the South African gold market page of BullionStar's Gold University gold market profiles.
So although the Gold Panda is not the first gold coin to be traded on an organised exchange, it is one of the few, and given the immensity of the Chinese Gold Market and the importance of the SGE, this development - of gold coin trading on the world's largest physical gold exchange - is another evolution to watch in China's constantly evolving physical gold market and should heighten the global profile of Gold Panda coins in other markets around the world.
This article was originally published on the BullionStar website under the same title "Chinese Gold Panda Coins now trading on the Shanghai Gold Exchange (SGE)".