The Capital Markets Authority (CMA) has granted approval for the listing of the first Exchange Traded Fund (ETF) in Kenya, to be issued by NewGold Issuer (RF) Limited which is incorporated in South Africa and will issue and list 400,000 Gold Bullion Debentures as a secondary listing on the Nairobi Securities Exchange (NSE) main investment market segment. The value of NewGold ETF tracks the price of gold. The listing price of the ETF will be determined on the listing date based on the real time cash market values of the gold price and the real time price of the Kenya Shilling.
ETFs are a type of listed open-ended index or unit instrument bought or sold on a securities exchange. The index or unit may be composed of ordinary stocks, bonds, commodities, futures or a combination of real assets with the objective of allowing for exposure to a portfolio of securities, assets or indices whose price movement is in tandem with the price movement of the constituent underlying securities or commodities. An ETF can be a domestic or offshore product. The Authority developed Policy Guidance Notes in September 2015 to operationalize the trading of ETFs in Kenya.
The Capital Market Master Plan prioritizes regional and international investment as one of the areas of focus. ETFs provide an opportunity for investors to diversify their investment portfolios to access international products. “This is a critical milestone in positioning Kenya as a gateway for regional and international capital flows by developing creative products that promote investor confidence in regional products. This is a step toward Kenya becoming a choice investment destination”, said CMA chief executive Mr Paul Muthaura.
The Authority observed that the supplemental prospectus of NewGold Issuer (RF) Limited makes adequate disclosure of material information in accordance with the requirements of the Capital Markets Act and the Exchange Traded Funds Policy Guidance Note 2015 to enable investors make an informed decision on the issue.
NewGold Issuer (RF) Limited, a wholly owned subsidiary of NewGold Owner Trust, was primarily listed on ETF sector of the Johannesburg Stock Exchange in 2004. Other secondary listings of the ETF have been on the Botswana Stock Exchange, Stock Exchange of Mauritius, Namibia Stock Exchange and Ghana Stock Exchange (2012).
The NewGold Gold Bullion Debentures issued subsequent to the secondary listing on the NSE will rank equally with each other and with all other Gold Bullion Debentures already in issue, prior to the NSE listing.
NewGold Issuer (RF) Limited uses proceeds from the Issue to acquire Gold Bullion. Gold Bullion held by NewGold are physical unwrought gold in the form of London Good Delivery Bars.