Economy

Investors snub gold-backed assets on sale at NSE

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Investors snub gold-backed assets on sale at NSE. FILE PHOTO | NMG

The sale of gold-backed assets at the Nairobi Securities Exchange (NSE) failed to meet the expected levels in the nine months of trading of exchange-traded funds (ETF) at the bourse.

NSE data shows Barclays NewGold ETF, which was launched in March, has received lukewarm reception from investors with less than 10,000 of the targeted 400,000 units sold.

The ETF, which offers local investors piece of the global gold trading market, received low interest due to lack of marketing and high entry barrier of at least Sh120, 000 for retail investors.

Investors have bought 9,800 units of the ETF so far, worth Sh12.4 million, with these trades taking place in just eight sessions.

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The bulk of the units sold — some 8,100 or 83 per cent — were moved on August 16 at a price of Sh1,268 per unit, raising Sh10.3 million for the issuer on the day.

“Gold is mainly seen as a crisis currency, which people run to whenever there is a shock, say a problem in the currency markets. For Kenyans, however, the default asset that they go for whenever there is a problem is land, and of late we have seen some go for cryptocurrencies,” said ABC Capital corporate finance manager Johnson Nderi.

“The amount needed to invest in the ETF is also not small at between Sh120, 000 to Sh130,000 for retail investors. It has also not been taken up robustly by stockbrokers.”

An ETF is a fund into which investors contribute money that goes into buying securities that make an index or a defined group of securities — such as banking or insurance stocks — put together.

Fund managers, who were expected to provide the bulk of the demand, are yet to come fully into the market for the ETF.

Experts had cautioned, however, that the uptake of the ETF would be gradual, being the first of its kind in the Kenyan market which is also not a major gold trading centre.

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