ETFs

Two new exchange traded funds giving investors access to South Africa’s palladium market have hit the ground running.

Standard Bank’s AfricaPalladium ETF, launched on March 24, had grown to R300m ($28.4m), the equivalent of 33,000 ounces, by March 28, the bank said. Absa, a member of Barclays, unveiled its NewPalladium ETF on March 27; by Monday afternoon Absa said current listings being processed, to be concluded on April 2 and 3, showed the fund had grown to 24,847 ounces of palladium, valued at R200m.

Generally, commodity prices have come under pressure globally. So why would now be a good time to launch a palladium-backed product? 

NewPlat, the world’s biggest platinum ETF (exchange traded fund), is leaving other players on South Africa’s financial markets in the dust.

New figures from eftsa.co.za show that in the first nine months of this year, R9.3bn ($954m) was raised in new capital by the exchange traded products industry through new listings on the Johannesburg Stock Exchange. Thanks to NewPlat, listed at the end of April, its issuer Absa Capital (an affiliate of Barclays) has been the main raiser of fresh capital, accounting for R8.2bn of the total raised. 

By Arash Massoudi

The two largest emerging market exchange traded funds soared after the US Federal Reserve said it would continue its massive $85bn a month bond buying programme unchecked. The Vanguard FTSE Emerging Markets ETF, which has a market cap of $53bn, gained 4 per cent and the iShares MSCI Emerging Markets Index, with a $41bn market cap, rose 4.2 per cent.

While news that the era of cheap money will continue is certainly one reason for the rally, beyondbrics also smelled plenty of burnt fingers. 

Samsung Group “is not a legal entity”, we read on the website of Samsung Electronics. Rather, it is merely “a term to conveniently refer to a group of companies tied together by their corporate history”.

This has not stopped Samsung Asset Management from creating an exchange-traded fund made up of shares in various members of the quasi-existent South Korean group, ranging from mighty Samsung Electronics to less celebrated bearers of the brand such as Samsung Fine Chemicals and Samsung Techwin. 

Platinum prices have been pretty rocky of late (see chart), but that’s not stopped exchange traded funds in the metal doing well. Earlier this year, Absa listed its fully-backed platinum ETF, NewPlat, on the Johannesburg Stock Exchange.

It has now emerged that NewPlat now accounts for approximately 20 per cent of the total global platinum ETF holdings. Absa confirmed to beyondbrics that as of the end of Thursday, the fund held 391,789 ounces of platinum to back its securities, representing over one-fifth of all platinum held by ETFs. What’s going on? 

Money managers seeking access to EM domestic debt have a new option from Thursday with the launch of what is claimed to be the world’s first exchange traded fund for emerging market inflation-linked bonds. 

South Africa is already known for being a one of the best-regulated financial markets – ranked first in the world by the World Economic Forum, no less. Now the country’s desire to keep in line with international market standards has prompted the Johannesburg Stock Exchange to strengthen its exchange traded derivatives market with a new default fund to protect investors.

The fund, announced on March 14, is aimed at protecting investors in the event of a clearing member defaulting – a necessity for clearing houses following the 2008 financial crisis. The question is – in the event it is needed, who ultimately pays? 

Photo: Bloomberg

South African investors have been cautious about dipping into exchange traded products (ETPs), which hit the scene just over 10 years ago. Reservations about the passive nature of such products have been an issue for some. But attitudes are changing and the figures are ticking upwards. 

The popularity of exchange traded funds seems to know no bounds. ETFs, or open-ended investment funds that trade on stock exchanges like stocks, have emerged from nowhere in recent years to control over $1.7tn in assets under management.

While most ETFs track the return of an equity index such as the FTSE 100 or the S&P 500, their ease of use and low fees have also make them the big new story in emerging markets investment. 

It’s been a good week for African fixed income, which is receiving a profile boost courtesy of a handful of indices.

First, sub-Saharan Africa’s two biggest economies, Nigeria and South Africa, joined leading global government bond indices. Now Kenya’s securities exchange has followed by launching the country’s first government bond index, which it hopes will deepen capital markets. 

Exchange Traded Funds are on the march in Asia and a new listing this week in Hong Kong highlights two of the main trends investors can expect to see.

Lippo Limited, the Hong Kong investment company of Indonesia’s Riady family-run Lippo Group, listed the first Hong Kong ETF focused on solely in property in greater China – the Lippo Select HK & Mainland Property ETF. 

ETFs aren’t just for developed market exchanges, as a new listing in Ghana shows.

Absa Capital’s gold-backed NewGold ETF, launched last week, follows its secondary listings in Botswana in 2010 and Nigeria in December 2011 with an initial offering to investors of 400,000 units, with each costing 31 cedis ($16) and representing 0.01 ounces of bullion. 

Pension calling

Colombia is not a country that figures high on the radar screen of most global firms when it comes to the asset management business. The country’s pension funds, with $66bn in assets under management, are tiny compared to the $311bn in the regional powerhouse that is Brazil.

But small can be beautiful. Just ask BlackRock. The world’s biggest money manager by assets is setting up shop in Colombia following the unexpected – but significant – success of a local exchange traded fund (ETF) it launched last year.  

Investors who spent last year clamouring for emerging market bonds are cooling off a little, according to a beyondbrics report on latest figures from EPFR Global, the fund flow data provider.

But as a report in Monday’s FTfm suggests, the change in sentiment might not just be due to a new round in the so-called “currency wars”. Instead, it might be that investors have noticed they are not making the sort of money they expected. 

[This post replaces a previous version in which we misinterpreted the direction of the ETF's currency hedging strategy. Thanks to BB readers MJT and Justin Cormack for spotting our error.]

The world’s first renminbi-denominated ETF tracking the gold price launched this week, seeking to take advantage of surging appetite for both bullion and the Chinese currency. Yet, since it started trading in Hong Kong on Tuesday, the Hang Seng RMB Gold ETF has failed to attract much interest from investors