Capital Markets

Absa Bank to replenish its gold units as investors exhaust supply


Gold exchange-traded funds (ETFs) at Kenya’s stock market on Thursday rose to the highest level since listing in 2017. FILE PHOTO | POOL

South Africa’s Absa Bank Limited will list new units of the gold-backed exchange-traded fund (ETF) after investors bought all that had been supplied on the Nairobi Securities Exchange (NSE).

The bank says it will make an order of 250,000 to 400,000 units for Absa New Gold ETF in the next few days.

The last units of the previous batch of 400,000 units were sold on December 1 after trading 102,700 units worth Sh219.78 million at an average price of Sh2,140.

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“Part of our policy is that … we shall restock our depository account with the units within three to five working days,” said Tito Namu, senior equity sales trader at Absa Securities Limited.

“Today’s [December 1] purchase and the fact that we have exhausted all the units is testimony to the fact there is a very decent buying and this means the second year run that we have sold the entire holdings of an ETF at the NSE.”

The gold-backed fund is traded in the same manner as normal shares of companies and its price is based on the Kenya shilling equivalent of the prevailing international market price of gold in US dollars.

Each NewGold security is equivalent to about 1/100th of an ounce of gold, which is held in a secure depository on behalf of investors and is backed by physical gold.

The ETF is sold in minimum lots of 100 shares (units) equivalent to one ounce of gold, and in incremental of 100 units.

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The securities were launched in 2017 with a listing of 400,000 units and with a market capitalisation of Sh576 million.

However, due to slow uptake until 2019, the holdings were reduced to 250,000 units through a reverse deposit.

Absa added an extra 400,000 units in 2020, bringing the number of holdings that have been offered in the Kenyan market to 650,000 units (6,500 ounces).

Gold is traditionally used as a hedge against inflation and is considered a safe haven asset at times of geopolitical risk such as wars.

The price of the ETF at the Nairobi bourse had increased from Sh1,470 in January 2020 to hit an all-time high of Sh2,140 on Thursday last week.

In the Kenyan market, it has pulled interest from high-net-worth investors and both local and offshore fund managers who hold part of their assets in gold.

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