The Securities and Exchange Commission (SEC) is set to introduce a new product to be traded on the Ghana Stock Exchange, which will give chance to investors to trade indirectly in gold and also create excitement in the securities market, the B&FT has been told.
The new securities will be traded as an Exchange Trading Fund (ETF) which operates as a listed stock and a collective investment scheme traded on the stock exchange. The Director-General of SEC, Mr. Adu Anane Antwi disclosed to the B&FT that the new ETF that will soon be launched on the GSE is a commodity backed one, which will have gold as its underlying asset or collateral.
Dubbed ABSA Capital’s Newgold ETF, the Fund will be locked into gold thereby allowing investors to have exposure to gold without directly allowing them to buy the assets. “It will continuously track gold prices and will allow investors to invest indirectly in gold bullion through the purchase of units in the ETF. Each of the Newgold ETF securities is equivalent to 1/100 units of real gold held in a secured stockpile of gold bullion,” he said.
Currently, gold is experiencing its all-time peak period trading at US$1850 an ounce on the world market. So for people who think commodities like gold are doing well on the world market, it is a way of locking in to the returns that gold is giving without directly exposing yourself. Mr. Antwi said the initiative to bring ABSA Capital’s Newgold ETF to the GSE is to improve the depth and width of the capital market, provide more investment variety for the Ghanaian investor and also provide liquidity to the market as ETF has guaranteed market-making mechanisms.
“It will lead to a reduction in the overall risk of portfolios in the market, since investment in commodities tends to exhibit low correlation with traditional stock and bond investments. “It will also introduce the concept of market-making onto the Ghanaian capital market, since liquidity providers will be appointed to buy and sell ETF units when the secondary market does not provide both sides of the orders at their quoted prices,” he added.
The SEC boss is highly regarded as someone who has appreciation for financial innovation. Already, assets managers and investment analysts are looking forward to the introduction of the Fund to rekindle euphoria in the market; ETFs are more liquid than buying and selling of listed shares as units can easily be created and liquidated.
Mr. Alex Asiedu, the head of Stanbic Investment Management Services - the assets subsidiary of Stanbic Bank Ghana - is hopeful that such innovation is what the market needs at a time the local bourse is facing some liquidity challenges. “Yes, it will bring more excitement because it is bringing some innovation onto the market.
“It is moving us away from this playing and buying this same old bonds, stocks and short-term paper and giving us exposure to what the economy is really exposed to: gold, cocoa etc.,” he told the B&FT in Accra.
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