Standard Bank, South Africa’s largest warrant trading house, is the first local financial institution to launch platinum warrants to retail investors. Standard Bank will soon be launching commodity warrants on gold and oil.

Retail commodity warrants allow investors to access the global commodity market from South Africa. Warrant holders will have the opportunity to make a rand profit from the upward or downward movement in the rand price of platinum. 

Brett Duncan, Director Equity Derivatives at Standard Bank says: “Investor interest in commodities as an asset class is growing steadily. Commodities provide local investors with the opportunity to build wealth on top of physical demand for metals, while also providing for a rand hedge instrument. The newly launched platinum commodity warrants give investors access to reasonably priced assets at higher than average yields.”

To invest in warrants investors pay a small price for the warrant but are exposed to the full value of the underlying asset. A small change in the price of the underlying commodity or exchange rate will therefore result in a greater change in the value of the warrant. The advantage of warrants for retail investors is that losses are limited to the initial purchase price of the warrant. Standard Bank is the only flat rate warrants broker in South Africa.

Duncan says: “The introduction of gold, platinum and oil warrants is aimed at providing for increased demand in commodity instruments. The introduction of these commodity warrants builds on other offerings which will provide investors with further exposure to commodities.”

Leanne Parsons, JSE Chief Operating Officer says: “We are delighted to welcome Standard Bank’s platinum warrant to the exchange. In listing this product, Standard Bank has expanded the number of ways that individuals can gain access to platinum investments. We look forward to working with the bank’s team to welcome more commodity reference warrants to the market in the foreseeable future.” 

For more information on platinum and gold commodity warrants and for educational information on warrants visit www.warrants.co.za

South Africa’s largest Exchange Traded Fund (ETF), Absa Capital’s NewGold ETF (NewGold), on Friday reached yet another milestone.

NewGold, the only commodity ETF in the local market, announced that it had attracted in excess of R10bn in assets under management, following the listing of an additional 7,600,000 NewGold debentures.  

NewGold invests directly in gold and tracks the gold price.

Designed by Absa Capital, the investment banking division of Absa Bank Ltd and the leading originator of ETFs in South Africa, NewGold is an investment tool that allows institutional and retail investors to invest in a liquid, listed instrument that is fully backed by gold bullion.

Today’s announcement follows the early June milestone when NewGold cracked the $1bn mark of assets under management (R8.4bn at the exchange rate of R8.40 to the US dollar at the time).

Vladimir Nedeljkovic, Head of ETFs and Index Products at Absa Capital, said that since it launched, in November 2004, NewGold’s assets had grown dramatically and that he expected further flows into the popular investment product.

Accounting for the strong inflows of over R1bn into the fund over the past month and a half, Nedeljkovic said: “The poor economic outlook and general market instability are making investors the world over seek out the comfort of gold. Gold is often less volatile and can be better performing than investing in gold shares.

While this article doesn’t deal directly with ferrous metls directly, I thought the insight from an industry expert in terms of what is happening in the diamond and jewellery market makes for interesting reading in terms of spend in the mining sector in general.

Give us your thoughts on what Uwe is saying:

Grave prospects lie ahead for the diamond supply industry worldwide as experts predict the flow to begin to slow to a trickle. With the ever-increasing gap between supply and demand, jewellers and mining companies have one aim in common: find a way to meet the demand for diamonds or lose out on business.

At present, only 17 primary diamond mines are in operation globally, but by 2012, this is predicted to reduce to only 12. The worldwide demand for diamonds is at approximately $13 billion and is expected to rise to $18 billion in the future.

Johan Louw of Uwe Koetter Jewellery comments on the imminent diamond shortage, “In most upmarket jewellery shops the diamond is the most important source of revenue. A shortage of diamonds would severely curtail our ability to operate and generate profits. We are feeling the slowing of supply in South Africa already. The best stones are leaving the continent at source to go to the Far East, Europe and America. In many cases we have to import the cut goods from those centres.”

Although diamonds are found in many countries, they are extremely difficult to recover, with 250 tons of ore yielding only a handful of diamonds. Only 20% of all diamonds mined are fine enough to be set into jewellery which compounds the problem of a shortage of diamonds.

The shortage of natural diamonds may encourage jewellers to buy synthetic diamonds. “Our aim is obviously to provide the best quality diamonds together with the best designs, but when sourcing good quality diamonds becomes too difficult, we may have to look into other avenues,” says Louw. “For now and the foreseeable future we do not supply synthetics. The diamond has a special power over people. This is because of its age and formation. It is a special gift of nature. The rarity, pureness and ‘naturalness’ creates the lore and romance that attracts people to it,” Louw elaborates.

Jewellery companies are likely to benefit from high demand because their prices can be set accordingly, however, if diamond supply hits an extreme low, even they may suffer. “People come to South Africa to buy jewellery because they believe it is inexpensive here. A shortage in good gems and competition from Dubai, India and China make meeting this expectation harder and harder,” explains Louw.

Diamonds are the most concentrated form of wealth negotiable anywhere in the world. More so, diamonds have come to be symbolic to cultures the world over and the demand for them is likely to increase as they grow rarer. It is well-known that people will pay almost any price to possess a diamond.

Louw speculates, “I predict that the public will buy more if diamonds are seen as a real investment. Another new market will then be created in people selling their diamonds which has increased tremendously in value.” The ever-increasing demand and failure to yield sufficient supply means that owning diamonds now is a good investment. With an increase in demand, the price for a carat will continue to rise in the next few years.

Contact information:
Johan Louw
Uwe Koetter Jewellers
Tel: 021 425 7770
www.uwekoetter.co.za

Source: PressPortal