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Barclays Bank launched the first exchange traded fund in east Africa on Monday with the listing of the Barclays NewGold ETF on the Nairobi stock exchange.
The product is a cross-listing of the $1.4bn NewGold ETF that listed on the Johannesburg Stock Exchange in 2004 and is also listed in five other African markets. Its initial size in Kenya will be Ks500m ($4.8m) but could be increased if there is sufficient demand.
It will be the first time Kenyan investors will have local currency exposure to the spot price of gold, making it attractive to local pension funds and other institutions that are restricted in the amount they can invest overseas. It will also reduce currency risk for people wanting to buy gold.
ETFs are traded like normal equities and their price varies depending on the price of the underlying asset.
Anthony Kirui, the head of markets at Barclays Kenya, was optimistic about the product’s prospects. “It’s the only ETF in east Africa and it’s going to help market players to diversify their investment risks,” he said.
Aly-Khan Satchu, an investment advisor in Nairobi, agreed, saying Barclays was “pushing at an open door” by launching a gold-based ETF. “There’s clearly demand for gold here because people see it as a store of value,” he said.
It will also serve as an indicator of demand for more complex and innovative products in Kenya, Mr Satchu said. Last week, after more than a year’s delay, the government launched M-Akiba, a platform through which retail investors can buy government bonds via their mobile phones for as little as Ks3,000 ($29). The initial product is a three-year infrastructure bond that is due to start trading on April 10.
Geoffrey Odundo, chief executive of the Nairobi Securities Exchange, said the exchange, which is the third largest in sub-Saharan Africa after Johannesburg and Lagos, plans to launch a derivatives market later this year.
Mr Satchu said:
It makes sense to be adding complexity to the stock exchange. I think that with the ETF they’re testing the water to see what kind of appetite there is for this kind of thing.