ABSA Capital, A South African investment firm, is set to float a gold-backed Exchange Traded Funds on the Nigerian Stock Exchange.A statement by the company on Wednesday noted that the ETF, called NewGold, would be floated in partnership with Vetiva Capital Management Limited.According to the statement, following the listing, investors will have the opportunity to trade in and own gold.The Associate Principal, Investment, ABSA, Ms. Batsile Ngomane, who was quoted as speaking during a training programme on ETFs organised by the NSE and ABSA on Monday in Lagos, said that Nigerian investors will enjoy the enormous opportunities presented by the soon-to-be listed product.This, according to her, will also serve as a good form of diversification from the equities section of the Nigerian capital market.As an improvement further, she said that investors in the fund would indirectly own gold bars in form of debentures, which would serve as a suitable assurance of the safety of their funds.She said, Each NewGold security, which is also listed on the Johannesburg Stock Exchange, JSE, is equivalent to approximately 1/100 ounces of gold bullion, held in a secure depository on behalf of investors, and is backed by physical gold. Thus, the value of a NewGold ETF security will appreciate or depreciate in accordance with the fluctuations in the price of gold bullion.Therefore, investing in the NewGold ETF, presents an opportunity for investors to have shares directly in gold bullion, especially as the fund tracks the price of gold in the global market.While speaking on the structure of the fund, the Head, Wealth Management Division, Vetiva Capital, Mr. Damilola Ajayi, noted that the fund would be traded on, like any other security.He also added that the trading dynamics of the ETF would be based on the price of gold, exchange rate fluctuation and information-driven.Ajayi said the fund would be different from previous cross-border listings, due to the fact that ABSA Capital would serve as a liquidity provider for the fund, providing the necessary liquidity and activity in the fund.According to Ajayi, NewGold will trade continuously on the NSE throughout the trading session, as liquidity in the fund is guaranteed.He, however, said that to address demand and supply imbalance, ABSA would, through Vetiva, intervene periodically in the trading of the funds, thereby, ensuring continuous buying and selling.ABSA acting as a market maker presents two advantages to the fund, that is pricing transparency and pricing efficiency, he noted.Ajayi further noted that the value of the fund would be determined by the price of gold in the global market and the exchange rate of the Nigerian currency against the dollar.
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