Barclays Bank of Kenya M.D Jeremy Awori (left) Dr. Kamau Thugge (centre) Principal Secretary National Treasury & Nairobi Securities Exchange CEO Geoffrey Odundo (right) Barclays Bank launched first exchange traded fund in Kenyan market,it will trade in the same manner as a normal equity security & will be subject to similar tax treatment & will be Kenya Shilling dominated. PHOTO:WILBERFORCE OKWIRI
You can now trade in gold at the Nairobi Securities Exchange (NSE).
This has been made possible by the launch of the world’s seventh largest Exchange Traded Fund (ETF) — a marketable security that tracks an index, a commodity, bonds, or a basket of assets such as an index fund – valued at Sh144 billion ($1.4 billion) .
The debut product, the largest in Africa, is being issued by South African firm NewGold Issuer Limited, which is also listed on the Johannesburg Stock Exchange as its primary market.
It offers investors an opportunity to diversify their portfolios away from ordinary stocks. On its first day of trading, the newly listed New Gold ETF traded 900 units worth Sh1.1 million and closed at Sh1,250.
“Based on our interactions with brokers and fund managers, the market is hungry for this product. The market opens with 400,000 units and opportunity for growth will depend on demand,” said Barclays Bank of Kenya Managing Director Jeremy Awori at the bell-ringing session in Nairobi, marking the beginning of formal trading.
The bank will rely on its stock brokerage subsidiary, Barclays Financial Services Limited, as the market maker that will be charged with buying or selling periodically to solve liquidity challenges.
This means that local investors wishing to participate in the gold market will no longer need to have the physical form (bullion) of the precious metal or look for offshore markets.
An ETF is a type of fund that 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 an exchange and experiences price changes throughout the day as it is bought and sold.
The NewGold Exchange ETF offers the opportunity to invest in gold bullion as it tracks the rand’s price of gold.
Capital Markets Authority (CMA) Chief Executive Paul Muthaura said the ETF market will offer investors an opportunity to gain a broader exposure to different asset classes and sectors with minimum sophistication.
“Investors on the Kenyan market shall now have an opportunity to diversify their portfolio of investment as the gold ETF will be tracking the world gold prices, allowing them to trade just like they do with normal shares,” said Muthaura in a speech delivered by CMA Director of Market Operations Wycliffe Shamiah.
The launch of the ETF puts Kenya at par with countries such as Botswana, Nigeria, Mauritius, Ghana, South Africa, and Namibia, which have similar products.
Brokers will be required to buy at least 100 shares of the ETF, meaning to access it, one will part with about Sh120, 000.
Retail investors wishing to buy less than 100 units will do so from brokers once the secondary market is ready.