Developing physical commodities markets key to Hong Kong’s futures ambitions, FSDC says

Hong Kong should prioritise strengthening its physical commodity trading capabilities as a precursor to developing a vibrant futures market, according to a new report by the Financial Services Development Council (FSDC).

While the Hong Kong stock exchange currently offers futures contracts in gold, silver and iron ore, trading volumes remain limited. The report said it was critical to focus on commodities that aligned with the region’s strengths and long-term objectives to enhance the city’s global standing.

With an established foundation in gold trading and strong demand from mainland China for iron ore, copper and aluminium, Hong Kong’s commodity market has significant growth potential, the report said.

“While a thriving futures market does not always require a strong physical market, the latter can enhance futures trading by anchoring demand from end users,” it said.

Hong Kong’s reputation as a “neutral, trusted and strategic trading hub” was becoming increasingly appealing as manufacturers diversified supply chains and sought stability amid global volatility, said FSDC chairman Benjamin Hung.