Third ETF set for BSE debut

Mbongeni Mguni | Wednesday March 19, 2014 12:37

An analysis of the NewPlat ETF price performance (indicated in grey shade) from inception until March 17, 2014 as compared to the SA Platinum Mining Index. Source ABSA Capital

When launched, the NewPlat ETF will operate similar to the Absa Capital’s other BSE product, the NewGold ETF, which tracks the price of gold. Each unit of both the NewGold and NewPlat represents an investment in physical gold assets stored abroad. The other ETF on the BSE is Nedbank Capital’s Bettabeta.

The NewPlat ETF first debuted on the Johannesburg Stock Exchange last April, before listing on the Stock Exchange of Mauritius earlier this year. Last August, the ETF became the largest of its type in the world with holdings of more than 579,000 ounces.

Yesterday, BSE deputy CEO, Thapelo Tsheole told Mmegi Business that Absa Capital was fine-tuning its listing prospectus with a view to submitting a formal application either this week or the next.

“The BSE will review the application to assess whether it complies with the ETF listing requirements,” he said.

“We will then refer it to the main committee which if it approves a date for the listing will be known.

“The ETF will become available to both retail and institutional investors after it is listed.”

According to Absa Capital documents, each unit of the NewPlat ETF will represent approximately a single one-hundredth of a fine troy ounce of platinum bullion of South African origin, stored in London and Zurich. The ETF price tracks the spot platinum price, in Rand.

“The rationale behind Absa’s listing of the platinum ETF is that the NewGold ETF performed very well and they want to list more of the same instrument,” Tsheole said in a previous interview.

The NewPlat ETF first debuted in South Africa last April, before being dually listed on the Stock Exchange of Mauritius earlier this year. Last August, the ETF became the largest of its type in the world with holdings of more than 579,000 ounces. By yesterday, NewPlat had physical platinum holdings totalling 944,612 ounces and had closed at R157.79 on March 17. The BSE expects the new ETF to boost liquidity and diversity on the local bourse, which has traditionally been plagued by a shallow depth of asset classes and illiquidity.

“The idea is to increase liquidity and provide broader risk returns for investors,” BSE CEO, Hiran Mendis told journalists last month.

“We believe there’s a longer way to go for ETFs even though progress has been made already. However, we can only achieve this with greater investor understanding of these products. “It is a space worth watching as we work on our third ETF.” The NewPlat ETF comes at a time when gold’s allure as an investment is fading largely due to rosier forecasts in developed economies such as the US. The Gold rose between 2010 and early 2013, as investors snapped up the precious metal, against global economic uncertainties and inflation. However, experts believe platinum is a superior metals investment to both gold and silver, pointing out that its growing allure is the ability to thrive in both high and low economic cycles.

“On the one hand, if the global economy recovers, platinum and platinum group metals, including palladium, stand to gain as well because the metal’s heavy industrial use in automobile parts should benefit from a recovering automobile market in the United States and Europe,” an analyst told the International Business Times recently. “On the flip side, if the global economy and equity markets stumble in the next few years, gold prices are likely to rise, as they traditionally have in uncertain times.

“But platinum usually trades on at least equal terms with gold. Historically, platinum has actually traded more than 95% of the time at a premium to gold.”