Foreigners dominate Absa gold-backed stocks on NSE

Foreigners dominate Absa’s gold-backed exchange-traded fund listed on the Nairobi Securities Exchange (NSE), fresh data by the markets regulator showed.

The Capital Markets Authority (CMA) said foreigners held 207,500 shares of the NewGold exchange-traded fund (ETF) as of February, dwarfing individual local owners and institutional owners with 15,000 and 26,100 shares, respectively.

The gold-backed fund is traded in the same manner as normal equity security 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 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 NewGold ETF has been a dormant counter since its listing in February 2017 and has only traded sets of 100 units to 800 units 10 times in the first three years. Then in March last year, the counter sparked to life trading nine times and hitting the highest activity at the beginning of April when the counter made up 8.15 per cent of the market turnover.

The counter has since lost 6.08 per cent in the year to date after the initial surge.

High-net worth investors and companies hoard their cash during difficult times rather than investing it to chase returns. Some companies also build huge reserves as buffers instead of borrowing.