Gold from Hong Kong is making its way to other havens – including Switzerland. The move highlights fears that the Chinese territory is no longer an offshore center.
Wealthy Hong Kong investors have moved as much as ten percent of physical gold holdings away from home, and to centers including Singapore and Switzerland, the «Financial Times» (behind paywall) reported on Friday, citing several gold specialists. The move follows a controversial Chinese security law for the territory last month, which has roiled finance as well.
«Many clients now perceive Hong Kong as riskier than other jurisdictions,» Joshua Rotbart, head of J Rotbart & Co, told the outlet. Based in Hong Kong, the company stores and trades gold. The precious metal recently rallied past $2,000 per ounce on pandemic and inflation fears and is expected to keep rising.
Role As China's Vault
Investors are concerned about Hong Kong's stability and rule of law, Bullionstar analyst Ronan Manly told the outlet – which raises the specter of property rights. «Investors are moving gold from Hong Kong to Singapore because they don’t like risk and uncertainty.»
Hong Kong's offshore center, the world's second-largest after Switzerland, is a $1.9 trillion haven and a traditional hub for wealthy Chinese. It is also traditionally the gold vault for wealthy Chinese. The territory enjoyed ample freedom since a British handover more than 20 years ago – and also seen frequent anti-government protests in recent years.
Switzerland's Gold Supply
Besides Switzerland's status as the world's largest offshore financial center, it also refines 70 percent of all the gold mined globally. Supplies threatened to dry up during the pandemic, during which operations ceased, as finews.com reported.
The security law in Hong Kong is frequently perceived as a sweeping measure to stifle any acts deemed threatening to the state, while backers highlight its potential to provide stability in the city. It includes provisions to give authorities more power to freeze and confiscate money and property and to get at the information.
Is Hong Kong Now Onshore?
Rotbart said mainland Chinese clients who hold gold via Hong Kong are «looking at Hong Kong as onshore and they want their gold offshore.» Another analyst, unnamed, said investors are fretting over being caught up either with Chinese authorities or in rising tensions between Washington and Beijing.
A long-standing ally of China, Switzerland got a taste of the peril after criticizing Beijing's hard-line, as finews.com reported. Swiss wealth managers like UBS and Credit Suisse, which have high hopes for banking wealthy mainland Chinese, threaten to be caught in the political crossfire.
