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Absa Capital sees significant growth opportunity for ETF’s in Africa  

 2/14/2012 
Absa Capital, the corporate and investment banking division of Absa Bank Ltd and affiliated with Barclays Capital, foresees the future of Exchange Traded Funds (ETF’s) in Africa as very favourable for investors, as well as for the respective local economies.

In a move signalling the bank’s commitment to further grow the range of investments products across the continent, Absa Capital recently listed the NewGold ETF on the Nigeria Stock Exchange (NSE). On 19 December 2011, the NewGold ETF became the first ever ETF to be listed on the NSE.

Dr Vladimir Nedeljkovic, Head of Investments at Absa Capital said: “The listing of the NewGold ETF on the NSE helps to further expand the Nigerian investment market. The capital markets in Africa are still very underdeveloped presenting an opportunity for significant growth in the region.”

“We believe that ETF’s present a gateway to this growth, but further market maturity is required, especially when assessing just how far more extensive global ETF offerings are,” added Nedeljkovic.

The listing of the NewGold ETF on the NSE is expected to help develop the investor market in one of Africa’s fastest growing economies by widening the choice of asset classes available to local investors. The NewGold ETF will also help facilitate an increase in liquidity on the NSE.

Upon listing, 400 000 NewGold shares were listed on the NSE. There are now three African countries (South Africa, Botswana and Nigeria) where the NewGold ETF, South Africa’s largest ETF and the fourth largest gold ETF in the world, is listed.

As of 09 February 2012, NewGold’s assets under management were NGN 359.77bn ($ 2.25bn).

Nedeljkovic continues: “There are currently 4,200 exchange traded products listed globally with 89% of the ETF’s assets under management being based in US and European products (69% and 20% respectively). An additional 9% is divided between Asia (6%) and Canada (3%). The rest of the world accounts for only 2% of total ETF assets under management.”

As for the African ETF landscape, the South African ETF market is relatively developed. There are 31 ETFs listed representing with R 38bn (approximately USD4.75bn) in assets under management. Absa Capital currently has 50% of the market share with 15 ETFs listed.

Nedeljkovic notes further advantages for Nigeria and the respective markets in which foreign liquid ETFs are listed:
  • It will help strengthen the regulatory, control and operational frameworks by introducing and implementing best practice international regulatory standards.
  • It would provide immediate liquidity to the market and help satisfy the need of investors for liquid securities.
  • It would provide investors with an access to previously unavailable asset classes, thus improving diversification opportunities and reducing investment risk.
The NewGold ETF has also proven to be one of the best performing ETFs in South Africa over five years, with a one year annualised return of 41.60%, two year return of 28.50% and a return over three years of 12.73%.

In 2010, The NewGold ETF became the first ETF to list on the Botswana Stock Exchange. This market has shown significant growth in the past year, with pension fund managers investing P 151.9mn in the ETF in an effort to benefit from the rising price of gold.

Absa Capital is also currently looking at listing the NewGold ETF on the Ghana Stock Exchange during the first quarter of this year.

Nedeljkovic concludes: “The NewGold ETF growth opportunity is inextricably linked to Africa, and will further expand Absa Capital’s suite of products and services across the continent.”

Ends

Note to the editor:

About Absa Capital
Absa Capital, a division of Absa Bank Limited (Absa) and affiliated to Barclays Capital, is a leading South African corporate and investment bank with global reach, offering clients financing, risk management and advisory solutions in a wide range of currencies and structures across the globe.

About Absa Capital ETFs and Index Products
Absa Capital is a leading originator of exchange traded funds (ETFs) in the South African market, and has 52% of the market share based on assets under management. The investment bank has listed and operates 10 ETFs. To find out more please visit www.absacapitaletfs.co.za

Issued by:
FTI Consulting
Claire McKay
+27 11 214 2409
+27 82 964 9884
claire.mckay@fticonsulting.com


For further information contact:
Dr Vladimir Nedeljkovic
Head of Investments
Absa Capital
+27 11 895 5367


Graeme Coetzee
Associate Principal
Marketing and Corporate Communications
Absa Capital
+27 11 895 6695
+27 79 695 9798
graeme.coetzee@absacapital.com
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