Interest heightened as historic ETF lists

MBONGENI MGUNI
Staff Writer | Wednesday July 14, 2010 00:00

 

Absa Capital, the Exchange Traded Fund (ETF)'s originator, listed 1.6 million gold securities on the BSE yesterday morning, with each security equivalent to one one-hundredth of a gold ounce.

The gold ETF, also known as NewGold, tracks the performance of the gold price in pula terms and allows individual and institutional investors to trade in it in a similar manner to equities' trading.

Absa Capital first listed the NewGold ETF on the Johannesburg Stock Exchange in November 2004. Since then, its assets under management have ballooned to US$1.93 billion (P13.51 billion).

At a price of P83 per security, the historic ETF realised a turnover value of P1, 512, 675 when Absa Capital's Manager, Batsile Ngomane, rang the trading session's closing bell shortly before 1000hrs.

Ngomane described the ETF's listing as a breakthrough for Absa Capital and the BSE, following a lengthy process involving regulatory approvals, educational campaigns and marketing initiatives.

'For us, this is very exciting,' she told journalists at the listing ceremony. 'It's like a breakthrough. We are proud to go into this new business cycle.

'It's a breakthrough in terms of going into a new country, conducting a dual listing and opening the gates to other ETF originators to come to this market.

'It (the ETF) will expand the distribution of our products and give us exposure to other markets. It has taken us almost a year to get to this stage and it was not an easy road. The BSE was very instrumental in bringing us to this point.'

The BSE's CEO, Hiran Mendis, was equally enthused: 'This idea was conceived some years ago when we did our strategy and looked at the various models concerned with listing ETFs,' he said. 'We decided on the dual listing route for the reason that the ETF is already performing on the JSE.

'(However), this does not mean all future ETFs will be secondary listings; we are waiting for the day when a primary listing will be done in Botswana and I'm calling on all market participants to come up with a local ETF.'

Explaining that each security represented an investment in a physical gold asset, Mendis noted that the precious metal was used internationally as a hedging instrument and was thus essential for investors.

'What we have done is allow this product to be bought and sold here for the benefit of investors and I hope people here will invest and diversify their portfolios.'

Absa Capital officials said a two-week marketing campaign targeting retail and institutional investors ahead of the listing had received 'a warm response' which enabled them to gauge the volume of securities to be provided for the initial listing.

'We have experienced a significant amount of interest from investors in Botswana for the product because NewGold gives investors access to a completely new asset class,' said Absa Capital's Head of ETFs and Index Products, Vladimir Nedeljkovic. 'It will also greatly increase liquidity on the BSE.'

 The NewGold ETF is South Africa's largest ETF and the third largest in the world. Unlike shares which can only be bought from a minimum of 100, the gold ETF will be sold from a minimum of one unit.