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Absa Gold Fund hits a new record high price at NSE on global rally
Since 2019, foreigners have largely remained bearish on smaller markets, largely due to a flight to the safety of developed markets amid global shocks such as the Covid-19 pandemic and the Russia-Ukraine war.
The Absa NewGold exchange-traded fund (ETF) has hit a new all-time high price of Sh4,265, after the cost of the precious commodity shot up this week on lingering global geopolitical tensions and expected rate cuts in the US.
The ETF’s valuation gain since the beginning of the year stands at 34.8 percent, mirroring the rise in the price of gold in the global market to an all-time high of $3,579 (Sh441,040) per troy ounce on Wednesday.
The Absa NewGold ETF pricing is based on the real-time price of gold in the international market. It is expressed in dollars but is translated into shillings for local reporting purposes, with each unit corresponding to approximately 1/100th of a troy ounce of gold, or 0.31 grammes.
The stability of the shilling at Sh129 to the dollar has meant that the ETF has not made an exchange gain or loss this year when translating to the local currency, tying its gain neatly to that of gold in the market.
The value of gold has appreciated amid rising global geopolitical and economic uncertainties. Gold is viewed as a safer asset for investors during times of economic uncertainty.
Investors see the commodity as a safer bet compared to the dollar. Uncertainty about the independence of the US central bank and the Federal Reserve has also propelled gold prices following President Donald Trump’s repeated attacks on the Federal Reserve's chair, Jerome Powell, and the recent attempt to fire one of its governors, Lisa Cook who has moved to court to block her ouster.
“Geopolitical trends are at the centre of the price increase of the metal, particularly the emerging plurality of policy in the West between the US and Europe and the issue of US import tariffs, which has clouded the outlook for markets,” said Wesley Manambo, a senior research associate at Standard Investment Bank.
“Investors have thus sought a safe haven away from the uncertainty of the US market, resulting in high demand for gold. When gold rises to an all-time high, so will the ETF at the NSE.”
A succession of global economic shocks in recent years, such as the Covid-19, Russia–Ukraine war, the Middle East strife between Israel and Hamas, and US tariffs on imports, have led to a steady rise in the value of gold and underlying assets such as Absa NewGold ETF.
An ETF is an investment instrument or fund that holds underlying assets, in which investors can buy and sell units, much like they do with ordinary individual stocks. ETFs can be structured to track a wide array of assets, including commodities or collections of stocks.
There are 400,000 units of the Absa NewGold ETF in issue at the Nairobi Securities Exchange (NSE), with a total market valuation of Sh1.76 billion. The units are mainly traded by foreign and local institutional investors, who hold 64.36 percent and 27.81 percent of the issued units, respectively, with local individual investors holding 7.83 percent.
The ETF was listed on the NSE in March 2017 at an entry price of Sh1,205 per unit, making it the first derivative instrument introduced into the Kenyan bourse.
It was first listed on the Johannesburg Stock Exchange (JSE) in 2004, but has since then had secondary listings on other African exchanges, including Botswana, Mauritius, Namibia, Kenya, and Ghana.
In July, the NSE welcomed its second ETF listing, with the dual listing of South Africa’s Satrix MSCI World ETF. The Sanlam-owned ETF, which, like Absa NewGold security, is primarily listed on the JSE, came in with an initial allocation of six million units available to local institutional and retail investors. Investors have so far taken up 100,000 units of Satrix ETF, which closed at an average price of Sh814 per unit yesterday.
Satrix MSCI World ETF captures over 1.300 large and mid-size cap stocks across 23 developed market countries, including the US, UK, Japan, Switzerland, and Germany.
The companies included in the fund all comply with the size, liquidity, and free-float criteria of the closely watched MSCI World Index, whose top constituents comprise global giants such as Apple, Nvidia, Microsoft, Amazon, Meta, JPMorgan Chase, and Alphabet, Google’s parent company.
