Market Capitalisation of South African Exchange Traded Products (ETPs) Grew by 19% in 2012

The market capitalisation of JSE listed ETPs grew from R40,1 billion at the end of 2011 to R47,8 billion at the end of December 2012, an increase of 19%. This mirrored the 20% growth in the market capitalisation of all JSE listed ETPs in 2011, indicating

During the course of 2012, R2,69 billion capital was raised for new issues of ETP securities on the JSE. Exchange Traded Notes (ETNs) accounted for R1,78 billion and ETFs for R0,9 billion of such new issues of securities.

The attached Schedule II shows the Shares in Issue by each ETP fund and New Capital Raised or Redeemed by ETP issuers in 2012.

The South African investor now has a wide choice of Exchange Traded Products that cover most asset sectors and classes. The total ETP product range in South Africa covers:

The underlying Table summarises the South African ETP industry by product issuers (suppliers) as at 31^st December 2012.

Absa Capital remains the largest issuer of ETPs in the South Africa market. It increased the number of products listed on the JSE from 10 in 2011 to 20 in 2012. Absa launched a series of low cost (TERs are expected to average around 20bps (0,2%) per year), total return funds tracking local equity and bond indices under its NewFunds brand last year. In addition, 5 new ETNs (NewWave) were issued, which cover the spot price of silver and platinum as well as offering investors exposure to currencies (Euro, US Dollar and UK Pound) through JSE listed securities.

Absa Capital ETP products, with a total market capitalisation of R21,3 billion, accounted for 44,6% of the total assets under management by the ETP industry in South Africa as at 31 December 2012.

Satrix Managers, now fully owned by Sanlam Investment Management, is the second largest issuer of Exchange Traded Products in South Africa, with R12,8 billion under management. Although Satrix has not issued any new products since 2008, its existing range of products, which cover the main indices on the local equity market, remain extremely popular, particularly with retail investors.

Deutsche Bank now has five ETFs listed on the JSE covering developed country equity markets (USA, UK, Europe, Japan and World indices), plus three increasingly popular emerging market ETNs, which cover China, Africa and All Emerging markets.

These products trade in rands on the JSE, but give direct exposure to international market indices, at very competitive costs and with low tracking error. For most investors, foreign exchange allowances are not impacted when investing in these Deutsche Bank products as they are registered as “inward investments” on the JSE.

Rand Merchant Bank rebranded its products under the RMB label (dropping the BIPS brand) and experienced steady inflows of new money into its inflation linked bond product (RMB Inflation-X) and into a new product launched in 2012 (RMB Mid Cap), which tracks the FTSE/JSE index of 60 mid-cap stocks listed on the JSE.

Investec Capital launched 3 new ETNs in late 2012, the innovative Gold ETN, which tracks the US dollar gold price and two total return products, tracking the FTSE/JSE Top 40 and SWIX Top 40 indices. These products charge no management fees and indicate that Investec is looking to establish itself as a passive asset manager in the local market.

Grindrod Bank was the only new company to issue ETPs in 2012. In March 2012, it launched the PrefEx ETF, which tracks the FTSE/JSE Preference Share index. This product offers a significant interest rate yield premium to typical money market products and should come into its own when interest rates start rising in South Africa. The PrefEx ETF attracted steady support and has grown from R10 million on issue to over R200 million by the end of 2012.