You can now trade in gold as Nairobi bourse in another first

An ETF is a type of fund which owns the underlying assets (in this case physical unwrought gold in the form of London Good Delivery Bars) and divides ownership of those assets into shares.PHOTO:COURTESY

Individuals and institutions can now invest in South African gold bars and coins at the Nairobi Securities Exchange (NSE).

This is after the markets regulator allowed South Africa’s NewGold Issuer (RF) Limited to list its secondary assets at the bourse.

The Capital Markets Authority (CMA) has approved Kenya’s first Exchange Traded Funds (ETF) contract, allowing NewGold Issuer to list 400,000 Gold Bullion Debentures as a secondary listing on the NSE’s main investment market segment.

“This is a critical milestone in positioning Kenya as a gateway for regional and international capital flows by developing creative products that promote investor confidence in regional products. This is a step toward Kenya becoming a choice investment destination,” said CMA Chief Executive Paul Muthaura.

An ETF is a type of fund which owns the underlying assets (in this case physical unwrought gold in the form of London Good Delivery Bars) and divides ownership of those assets into shares.

The market security is then traded like a common stock on a stock exchange and experiences price changes throughout the day as they are bought and sold.

The NewGold Exchange ETF offers the opportunity to invest in gold bullion, as it tracks the rand’s price of gold.

NewGold debentures were listed on the Johannesburg Stock Exchange (JSE) in 2004, with secondary listings in Botswana Stock Exchange (BSE), Nigeria Stock Exchange (NSE), Mauritius Stock Exchange (SEM), Namibia Stock Exchange (NSX) and Ghana Stock Exchange (GSE).

The listing price of Kenya’s ETF will be determined on the listing date based on the real time cash market values of the gold price and the real time price of the shilling.

The authority observed that the ETF’s prospectus makes adequate disclosure of material information in accordance with the requirements of the CMA Act and the Exchange Traded Funds Policy Guidance Note, 2015 to enable investors make an informed decision on the issue.

The NewGold Gold Bullion Debentures issued subsequent to the secondary listing on the NSE will rank equally with each other and with all other Gold Bullion Debentures already in issue, prior to the NSE listing.

The Capital Market Master Plan prioritiSes regional and international investment as one of the areas of focus.

ETFs provide an opportunity for investors to diversify their investment portfolios to access international products.

This comes at a time when the first African local-currency bond ETF is set to be launched, according to a Mauritius fund manager.

The fund that will replicate the performance of the AFMI Bloomberg African Bond Index, a weighted composite index of local-currency sovereign debt in South Africa (accounting for 60 per cent of the index’s weighting), Egypt, Nigeria, Kenya, Namibia and Botswana, targets to raise $25-30 million. The fund will then be expanded to $100 million after a year, and $500 million in three years’ time. The African Development Bank (AfDB) is providing $25 million or 25 per cent, whichever is lower, to the fund as a seed investor.

The ETF will be listed on the Stock Exchange of Mauritius and is expected to have a total expense ratio of 65 basis points.