The fund serves as the city’s de facto sovereign wealth fund and war chest to defend the Hong Kong dollar’s peg to the US dollar, totalling HK$134.7 billion in the first six months of this year.
In delivering his Policy Address, Lee noted that the Hong Kong Monetary Authority (HKMA), the city’s de facto central bank that manages the fund, is exploring the possibility of raising the Exchange Fund’s gold holdings and participating in the local spot and futures market.
“It (HKMA) is also considering gradually transferring its physical gold holdings to designated vaults appointed by the Hong Kong Precious Metals Central Clearing Company Limited (PMCC),” Lee added.
The PMCC is a government-owned company that previously launched a trial clearing and settlement system for gold in early July.
Speaking at the Legislative Council, Lee said the gold clearing and settlement system would start its official operations in the first quarter of next year, adding that a dedicated hotline would also be set up to offer one-stop support for mainland overseas gold traders.
Other measures include having the Mandatory Provident Fund (MPF) Schemes Authority, which manages local residents’ pension funds, allow for a greater range of MPF investments in gold exchange-traded funds (ETFs).
The government will also encourage the sector to set up an industry association for gold and host a flagship event next year, he added.
On the broader commodity trading ecosystem, Lee noted the city was storing over 20,000 tonnes of metals at designated local warehouses, with total storage area exceeding 60,000 square meters.
This came after the London Metal Exchange (LME) included the SAR in its global warehousing network last year, and approved 15 facilities so far to store metals, such as copper, tin, and zinc.
To further transform the city into a global commodity trading hub, Lee said authorities would roll out more tax incentives to attract more traders to set up and expand their businesses in the SAR.
“We will implement a half-rate tax concession for commodity trading, we will study tax concessions for gold and commodity trading, we’ll foster the establishment of more accredited warehouses,” he said, adding that a consultation would be launched next year.
He also noted a pilot project for tokenised warehouse-receipt financing would be launched by the city’s bourse operator next year.
The International Organisation for Mediation (IOMed) will also be encouraged to explore the establishment of a special panel of mediators for commodity trading, he added.