Having reached more than R100 billion at the end of last year, the value of the exchange traded product (ETP) market - comprising exchange traded funds (ETFs) and exchange traded notes (ETNs) listed on the JSE - fell to R91.7bn at the end of March, a decline of 9% in the first quarter.
This is according to an industry report by Mike Brown, the managing director of ETF platform etfSA.co.za.
Brown says two factors were responsible for the fall: the sharp decline in financial markets in March due to the Covid-19 pandemic, and a significant reduction in the number of shares in issue for platinum and palladium ETFs during the quarter.
“The decline in ETF/ETN prices in March was more significant for South African indices tracking equity and bond ETFs than for the global index-tracking ETFs listed on the JSE, where rand depreciation dampened the fall in prices.
“Precious metal prices, as in the case with the last market collapse in 2008, provided a good defensive hedge in the current market turmoil, but share redemptions in platinum group metal (PGM) ETFs helped contribute to the market capitalisation decline, by offsetting price increases,” Brown says.
He says the total capital redeemed in the first quarter amounted to R11.19bn, “the most significant decline in the size of the ETP industry in South Africa for the past 20 years”.
1nvest, the new brand for the merged Standard Bank and Standard Liberty ETF business, had to process significant redemptions for its Africa Palladium ETF (R4488.3 million). There were also sizeable redemptions in the 1nvest Rhodium ETF (R631.4m) and the Platinum ETF (R164.5m).
Absa Capital also redeemed a significant number of securities during the quarter for its PGM-tracking ETFs.
The two main products in which redemptions occurred were the NewGold Platinum ETF (R2200.4m) and the NewGold Palladium ETF (R517.5m), Brown reports.
All JSE-listed ETFs tracking gold, silver and other metals have to be 100% physically backed by bullion.
PERSONAL FINANCE