Capital Markets

Absa doubles gold units at NSE on high demand


Absa Bank along Muindi Mbingu Street in Nairobi. FILE PHOTO | EVANS HABIL | NMG

South Africa’s Absa Bank Limited has doubled the units of gold-backed exchange-traded fund (ETF) at the Nairobi Securities Exchange (NSE) to match increased demand.

The NSE Limited has disclosed in the latest annual report that Absa, which was last December weighing to add between 250,000 to 400,000 units eventually settled for the maximum as investors sought out gold as a safe haven, exhausting supply.

Read: NSE gold fund hits Sh92m trade on flight to safety

The listing of 400,000 units doubled the number of units given that Absa had debuted the NSE with 400,000 units on March 27, 2017, promising to add more units depending on demand.

“As a result of the growing demand for the NewGold ETF the issuer listed an additional 400,000 units in the year (2022),” says NSE in the latest annual report.

The doubling of the listed units came on the back of increased demand, with a total of 827,400 units traded last year compared to 75,800 units in the previous year, representing a 10.9 times jump in volumes.

The NewGold ETF debuted on the NSE at Sh1,250 per unit but the price has been appreciating, especially last year as investors sought out gold as a safe haven.

“This reflects investor confidence in the asset’s ability to support portfolio diversification and hedging amidst geo-political tensions in Europe,” says NSE.

Globally, spot gold was traded at $ 1,979.55 (Sh274,465) per ounce on Friday, with the daily prices staying above $1,900 (Sh263,435) since mid-March.

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 NewGold ETF last year gained by 15 percent on increased demand, registering a turnover of Sh1.28 billion compared to Sh139 million in 2021.

The price of the ETF rallied further in March, hitting historic highs of above Sh2,600 per unit. The ETF opened Friday trading at Sh2,560.

The current price translates to a year-to-date return of 15.47 percent in a market where more than half of stocks have shed value and even dragged the market to levels last seen a decade ago.

The NewGold ETF or Absa’s gold-backed exchange-traded fund was first listed on the Johannesburg bourse in 2004 but it has since had secondary listings on other African exchanges, including Botswana, Nigeria, Mauritius, Namibia and Ghana.

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.

Read: Absa first-quarter profit rises 51 percent to Sh4.5 billion

Data from World Gold Council, the market development organisation for the gold industry, showed ETFs backed by physical gold posted net inflows of $824 million (Sh114.2 billion) in April while holdings increased by 15 tonnes to 3,459 tonnes of the yellow metal.

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