First Shariah-compliant ETF debuts on Main Market

This will provide ‘visibility’ to the asset class and boost Malaysia’s position as a financial innovator, says MD


THE listing of the first Shariah-compliant exchange-traded fund (ETF), TradePlus Shariah Gold Tracker, would provide “visibility” to the asset class and boost Malaysia’s position as a financial innovator.

Affin Hwang Asset Management Bhd MD Teng Chee Wai said in the past, fund managers who invest in gold ETF have to go abroad, like to the US.

“But today, we bring that visibility back to Malaysia by offering to local institutions,” he told reporters after the listing of the ETF in Bursa Malaysia in Kuala Lumpur yesterday.

“The Shariah gold ETF would become a convenient platform for institutional investors, as this kind of visibility in the asset class was not made available for Malaysians,” he said.

The ETF opened to a premium of 1.5 sen to RM1.73 over its issue price.

The fund, which was introduced by Affin Hwang, will invest a minimum of 95% of the fund’s net asset value in physical gold bars purchased from LBMA (London Bullion Market Association)- accredited refineries.

The balance will be invested inIslamic money market instruments and Islamic deposits.

The issuer is optimistic that the fund will grow between RM100 million and RM200 million over the next one year.

Teng said the institutional players are the main target for the fund as gold provides a good diversification option for investors.

“The other market that we hope to tap is the retail market due to the booming interest among Malaysians into this asset class, as it serves as a cheaper avenue compared to other alternatives.

“Gold is expected to become a nice alternative for investors — especially during a period of uncertainties,” he said.

Affin Hwang has invested about RM20 million as initial capital to kickstart the fund.

“With no similar offerings, the fund is the first of its kind in the domestic market, which provides investors with a low-cost and efficient entry point to gain exposure to gold,” Teng said, adding that gold remains as one of the most popular investments.

“Its role as a natural hedge and low correlation to other asset classes will allow investors to diversify their portfolio and reap better risk-adjusted returns and lower volatility,” he added.

Gold currently trades at about US$1,300 (RM5,291) per pound, up from the U$1,100 level in 2015, though it is lower than the US$1,900 level in 2012.

Bursa Malaysia Bhd CEO Datuk Seri Tajuddin Atan said the ETF listing marks the ninth ETF to be listed on the exchange, totalling about RM1.9 billion.

He said based on the current statistics, ETFs have seen great success globally since it was introduced over two decades ago.

“The growth of ETFs in the industry has been astronomical. In 2009, the value of the industry stood at US$1 trillion and as at 2016, total asset under management (AUM) for ETFs was about US$3.2 trillion.

“Some experts believe that by 2021, the total AUM for ETFs would top close to US$7 trillion,” Tajuddin said.

The fund’s share price closed at RM1.74 yesterday from the reference price of RM1.72.