Monday, September 5, 2011

Hong Kong Gold Mining Stocks and Gold ETFs

In the US, gold mining shares have underperformed gold bullion and we've talked this could be a good time to invest in gold miners based on the gold mining index to gold price ratio.

Today, I'll have a look at ways to invest in Gold on the Hong Kong stock market (hang seng) via Gold mining shares or Gold ETFs.

Here's a list of Gold mining companies listed in Hong Kong:
Here's a list of Gold ETFs offered in Hong Kong:
In Hong Kong, it is relatively easy to buy Physical bullion directly at the Bank or online with Wing Hang bank Gold passbook that allows you to ask for delivery of gold Maples or 5-tael gold bars. You can also be exposed to Gold bullion by buying the 2 ETF above, but there is no ETF specifically holding gold mining shares listed in Hong Kong or China such as GDX in the US, so to replicate that, you could build a portfolio with the 7 stocks mentioned above.

Let's have a look at the performance of those stocks over several years.
This company has been listed in 2009, has a P/E of 7.9 and a market cap of 7.9 billion HKD according to Yahoo. Unfortunately, this data is irrelevant since the stock has been suspended since May 2011 (See the flat line in the chart?) due to potential accounting fraud.

The chart at Yahoo is messed up, so I used Bloomberg with this company which has a negative P/E and a market cap of 9.45 billion HKD according to Yahoo. It has been listed in 2006 and has participated to the Chinese bubble, but since then it has performed poorly.

This company has a P/E of 170 and a market cap of 5.10 billion HKD. It has been listed since 2004 and has not performed as well as Gold over that period of time.
Another Bloomberg chart as yahoo does not handle stock splits very well. This is the star of gold mining stocks. It has massively outperformed Gold (GLD is in Green in the above chart). It has a P/E of 36.42 and a market cap of 15.47 billion HKD.

This company has only be re-listed on December 2010, so the chart is only from December 2010 to September 2011 and not so relevant. Nevertheless, the stock has underperformed gold. Its P/E is 34.54 and market cap 14.75 billion HKD.

Zijing Mining has a P/E of 13.42 and 21.03 billion HKD market capitalization. It has not done anything since 2004 (even a bit down), even though Gold has more than triple since then. The recent drop is partly due to a pollution issue with one of its mines.

Lingboa gold has not returned anything for those who hold it between 2004 and 2011, although the price of gold skyrocketed. It has a P/E of 10.34 and a market cap of 1.25 billion HKD making it the smallest company in this list.

Only 1 out of 7 stock has outperformed Gold (Zhaojin Mining Industry) over the years, the others have poorly performed either for some valid reasons or because they are being ignored by the market.

To learn more about Gold mining stocks in Hong Kong, I recommend you read the report "Gold price rise may speed up China’s Precious Metals Industry Report in 2H11."


  1. Good Article, indeed the market is bullish on gold because of the Fiscal Cliff in the States.
    I would like to contribute some statistics below.
    Correlation Return
    1194 HK Equity 0.670322175 1.060810811
    1818 HK Equity 0.784919088 1.034124629
    2099 HK Equity 0.398790058 0.77672956
    2899 HK Equity 0.718738163 1.080495356
    3330 HK Equity 0.337265262 1.038235294

    Above are the one year data for the equity's correlation with Gold and their period return.
    Gold on the same period has return 1.27% (1.01286). While 2899 HK has the second highest correlation with gold and the performance in return coupled with the bullish view on Gold. 2899 HK definitely a good pick.

    1. Thanks for the insightful comment, Unknown.
      Gold mining stocks have gone up in recent months, hopefully this will continue.

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  3. Yes i am totally agreed with this article and i just want say that this article is very nice and very informative article.I will make sure to be reading your blog more. You made a good point but I can't help but wonder, what about the other side? !!!!!!THANKS!!!!!!gold mine investment