Rising gold prices and investments in US stock exchanges through Kenya’s first money manager at Standard Investment Bank (SIB) beat returns from the Nairobi bourse in the first seven months to July.
In a brief to investors, Standard Investment Bank said its forex and commodities trading platform made a return of 22.17 per cent in the last seven months.
The investment bank linked the return to higher gains made from gold trading and investments in the S&P 500 — the index that measures the stock performance of 500 large companies listed on stock exchanges in the United States.
At 22.17 per cent, the return managed to beat blue chip companies that make up the Nairobi Securities Exchange (NSE) 20-Share Index, which dropped to a 10-year low, reflecting investors’ expectations of depressed earnings for the listed firms.
“Major moves in the gold and American stock markets largely contributed to this return,” said the notice from Nahashon Mungai, head of global markets at SIB.
The S&P 500 opened the year at 2,510.03 points and closed 3,027.98 at the end of last month, reflecting a rise of 20.5 per cent.
Gold prices rose 16.35 per cent in the period under review to 1,510.38 as investors sought the safety in the precious metal.
“We have witnessed sharp spikes on gold driven by geopolitical concerns from US threatening tariffs on Mexico, to the U.S-Iran gulf tensions, US-China trade war jitters, global recessionary concerns,” said Mr Mungai. The Capital Markets Authority (CMA in mid-December granted SIB first money manager licence, which allows the firm to invest offshore in forex and commodities on behalf clients.
The investment bank trades stock indices, currencies and commodities for clients who require minimum of Sh250, 000 to tap the global market.
Local investors wishing to participate in the precious metals market have had to either trade in the commodity in its physical form (bullion) or through unregulated offshore dealers.
Under precision metal trading, investors’ money will go into buying securities that own an underlying commodity such as gold. The investors do not own the commodity directly, but instead hold shares in the security whose value goes up or down in tandem with the value of the underlying asset.
“The investors have the ability to enter or exit in seconds because we are dealing in a global market abundant with liquidity,” said Mr Mungai.
Lack of liquidity had dimmed trading of the gold-backed assets, which was launched in March 2017, at the Nairobi Securities Exchange (NSE).
SIB is racing its revenue streams that include share and bond trading commissions as well as advisory fees.