Central bank seeks identity of major NSE gold traders

The Central Bank of Kenya is seeking to know the identity of big traders at the Absa’s gold-backed exchange-traded fund listed on the Nairobi Securities Exchange (NSE) after the counter picked up trades during the Covid-19 pandemic.

The NSE notified traders to provide information directly to the banking regulator and identity of any investor buying gold stock worth more than $10,000 (Sh1.08 million).

Trade in gold stocks surged last year as investors shifted to safe assets to hedge against the falling shilling, declining equities and uncertainties in other asset classes.

“In order to ensure compliance with the applicable laws, upon request from Absa Group Limited, market participants would be required to submit, directly to the Central Bank of Kenya (CBK), the required KYC (know your customer) information and supporting documentation of the respective clients who invest in the NewGold ETF in amounts exceeding $10,000 or its equivalent in any other currency carried out by the Market Participant,” said NSE chief executive Geoffrey Odundo in a circular.

The NewGold ETF, which is the largest gold ETF in Africa and the first in East Africa, was listed on the Nairobi Securities Exchange in 2017.

It is primarily listed on the Johannesburg Stock Exchange, with secondary listings in Kenya, Botswana, Nigeria, Mauritius, Namibia and Ghana.

The fund is fully backed by physical gold bullion and offers institutional and retail investors the opportunity to invest in gold bullion.

Since it tracks the international gold price “spot price”, the prices quoted to local investors in Kenya shillings and are subject to foreign exchange currency conversion that is closely monitored by the banking regulator.

The Absa gold launched in 2017 and with a market capitalisation of Sh576 million is now worth Sh742 million at the price of Sh1,855 a unit.

The New Gold ETF has been a dormant counter since its listing in February 2017 and only traded sets of 100 units to 800 units ten times in the first three years.

Absa had initially issued 400,000 shares and cut to 150,000 due to low demand.

However, at the onset of Covid-19 in Kenya, investors in the gold-backed ETF enjoyed a big increase in the value of their holdings following a sharp rise in the global price of the precious metal as gold is seen as a haven investment at times of economic shocks.

Barclays has since unlocked the entire shares, which has seen foreigners scoop up 207,500 shares as of February, dwarfing individual local owners and institutional owners with 15,000 and 26,100 shares, respectively.

According to the Capital Markets Soundness report, the listed new gold ETF has been on a decline during the quarter save for February that recorded a turnover value of Sh54.17 million with other months recording zero turnover values.