Absa plans gold ETF expansion

[miningmx.com] — ABSA Capital on Tuesday confirmed it had concluded the secondary listing of its gold exchange traded fund (ETF), NewGold, on the Botswana Stock Exchange, and said other listings throughout Africa were planned.

“This is a first step for us,” said Vladimir Nedeljkovic, head of ETFs and index products at Absa Capital. “We will be rolling out the ETF in other markets. We’re looking now at options,” he said.

Nedeljkovic also signalled that plans by Absa to launch South Africa’s first platinum-backed exchange traded note (ETN) was “quite imminent. All the regulatory hurdles had been completed and the proposal now sat before the JSE, he said.

“I can’t predict the size or success of the platinum product, but we have been speaking to investors and the feedback has been relatively good,” said Nedeljkovic. It’s an open ended fund and there’s sufficient liquidity in the market for it, he said”.

The ETN is subtlely different from an ETF in that the former is issued by a bank and carries the credit risk of the bank.

Gold backed ETFs have taken the investment world by storm owing to their low cost, low risk investment profile, and because they allow investors exposure to gold without having to absorb the frailities of gold company management.

In the last 18 months, the NewGold ETF had increased its market capitalisation by about R7bn to R14.7bn, Nedeljkovic said.

Commenting on the second listing in the Botswana market, Nedeljkovic said that the ETF would meaningfully add to the local market there since liquidity was relatively small and the product could be deemed a domestic product.

Botswana investors are bound by regulatory rules enabling them to invest only 30% of their total portfolios in offshore products.

We will be rolling out the ETF in other markets

On Tuesday morning about 1.6 million NewGold securities were listed on the Botswana Stock Exchange, according to I-Net Bridge, a newswire service.

“Absa Capital is excited to list the first ETF on the Botswana Stock Exchange, allowing individual and institutional investors direct access to an efficient and cost effective way to invest in gold through a listed security,” Absa said in a statement.

“Historically, gold has demonstrated its role as an effective portfolio diversifier, a store of value and a safe haven investment in uncertain economic times, as well as an excellent currency hedge,” Nedeljkovic said.