THE success of NewPlat, Absa’s platinum-backed exchange-traded fund (ETF), talked to the positive perception investors had of the long-term fundamentals of platinum group metals, Vladimir Nedeljkovic, the head of investments at Absa’s corporate and investment banking division, said last week.
NewPlat has outperformed the gold-backed ETF NewGold, listed by Absa Capital on the JSE about 10 years ago, despite the 11-week wage strike in the platinum belt. “In the long to medium term, prospects for platinum are perceived to be better than gold because the global economy is recovering,” Nedeljkovic said.
Gold is perceived as a store of value, and is often a haven in crises. Platinum is an industrial metal whose demand increases when the economy recovers.
In addition, platinum was linked to the South African economy, and thus asset managers were more comfortable investing in platinum than in gold, Nedeljkovic said.
This was because the country contributed 70 percent of platinum production, while its gold production had declined and was not as important as before.
The NewGold ETF was the first commodity-backed ETF to be listed on the JSE, in 2003. At the time, the product was new to the market and it took investors a year to warm to it.
It is the largest ETF in Africa, backed by 1.35 million ounces of gold bullion, and its assets are worth R17.8 billion. It is listed on multiple exchanges in Africa including Botswana, Nigeria, Ghana, and Mauritius.
Last week, less than a year after it was listed on the JSE, NewPlat reached the 1 million ounces mark. It is valued at R15.3bn and is the largest platinum ETF in the world. It is double the size of the second-biggest platinum ETF, which is listed in New York and manages about 562 000 ounces.
NewPlat is the largest ETF in Africa after NewGold and it is also listed in Mauritius.
Platinum ETFs globally comprise about 2.5 million ounces, a new and significant source of demand for a metal that is, an important South African export.
About 70 000 employees at Anglo American Platinum, Lonmin and Impala Platinum have been on strike since January 23 for higher wages.
“It is interesting that we have not seen an increase in the platinum price. This indicates that there is a lot of above-ground inventory that has not been used up,” Nedeljkovic said.
The additional demand provides a level of price support for the metal, which is positive for the platinum mining industry as well as for the country as a whole.
Standard Bank and Absa listed new palladium exchange-traded products last month.