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:

• 0246.HK:Real Gold Mining Limited
  
• 1051.HK: G-Resources Group Ltd
• 1194.HK:China Precious Metal Resources Holdings Co., Ltd
• 1818.HK:Zhaojin Mining Industry Co. Ltd
• 2099.HK:China Gold International Resources Corp Ltd
• 2899.HK:Zijin Mining Group Co., Ltd
• 3330.HK:Lingbao Gold Co., Ltd

Here's a list of Gold ETFs offered in Hong Kong:

• 2840.HK: SPDR GOLD TRUST Physical ETF that tracks the LocoLondon spot gold price (Similar to GLD in the US)
• 3081.HK: VALUE GOLD ETF Physical ETF that tracks the London Gold Market Fixing Price.

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.

• 0246.HK:Real Gold Mining Limited

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.

• 1051.HK: G-Resources Group Ltd

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.

• 1194.HK:China Precious Metal Resources Holdings Co., Ltd

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.

• 1818.HK:Zhaojin Mining Industry Co. Ltd

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.

• 2099.HK:China Gold International Resources Corp Ltd

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.

• 2899.HK:Zijin Mining Group Co., Ltd

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.

• 3330.HK:Lingbao Gold Co., Ltd

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."