The Barclays New Gold Exchange Traded Fund (ETF) is the top performing investment at the Nairobi Securities Exchange this year.
While the NSE has introduced several new products like REIT’s, index futures, equity futures, and the M-Akiba bond, it is the ETF that is shining this year.
The Barclays New Gold ETF was launched at the NSE in March 2017 of 400,000 shares was listed at the NSE in March 2017 at a price of Kshs 1,205 per share. This was a relatively small number of shares for the new investment class. But their liquidity is assured as Barclays buys all the shares that are sold, paying investors two or three days later.
The ETF is ideal for pension and insurance funds and other institutional investors, as well as for individuals and retail buyers, and gold does feature in the portfolios of a small number of high net worth individuals in Kenya. The ETF attracts no capital gains tax and is shariah-compliant.
An exchange traded fund (@Barclays New Gold ETF) was also listed in early 2017 @NSE_PLC https://t.co/dIr9vcnONz The prospectus also used those words, “invest in gold without inviting thieves to your middle-income apartments in Parklands.” @Barclays_Kenya @MihrThakar @hervegogo https://t.co/A5FqZaTjym
— Aly-Khan Satchu (@alykhansatchu) March 21, 2019
Gold has traditionally been a hedge for times of turmoil, and with ongoing trade disputes between the US and China, UK’s Brexit, slowing growth in Asia and Europe, and uncertainties of debt levels and weaker currencies in Africa, gold represents a hedge, or point of safety that people turn to as a store of value. Africa’s largest economy, South Africa is also facing its own capital flight and repatriation issues.
Gold has risen on the back of global demand for safety as the ETF represents the fractional equivalent of the price of real gold bullion. Gold is now ~$1,500 per ounce, up from $1,280 at the beginning of the year. The price has moved between $1,000 and $1,300 over the last five years.
As Nairobi investors have suffered paper losses with NSE share index prices dropping to ten-year lows, levels last seen in March 2009, the NewGold ETF has ascended this year by 21% and is up 25% since its introduction. That’s largely due to it being determined the global price of gold, not by local demand.
NewGold, which is the largest ETF on the Johannesburg exchange, is also listed and trades on share exchanges in Botswana, Nigeria, Ghana and Mauritius.