Sharp gains for Old Mutual ETF

PHILLIMON MHLANGA

The Old Mutual Zimbabwe Stock Exchange Top 10 Index Exchange Traded Fund (ETF) has been having a strong run in the 34 days to Monday this week, gaining about ZWL$97m in value amid growing interest in the financial instrument, Business Times can report.

The price of the ETF, which had its listing debut on the ZSE on January 4, 2021, also jumped 80% to ZWL$1.80 on Monday this week from ZWL$1.

The ETF offers exposure to ZSE Top 10 counters whose numbers in the last 34 days also hit historical high levels. 

The stocks have been bullish, with total market capitalisation breaching the ZWL$500bn mark this week. 

Investors get an opportunity to own 10 underlying stocks in one investment in the ETF.

This means the financial instrument, which is as liquid as underlying financial assets, is expected to improve liquidity, diversify the current investment offerings at the local bourse and deepen the market.

Investors who wish to invest in the fund were only able to do so through two ways, by buying units in the ETF through any registered stockbroker or alternatively investing in kind by delivering a basket of stocks in the exact weights of the fund through an authorised participant.

But, this week, the ETF was also included on the ZSE direct platform, a move likely to increase the accessibility of the financial instrument.

ZSE Direct was launched in September to drive participation of individual investors on the bourse.“

The ZSE advises stakeholders that the Old Mutual ZSE Top 10 ETF is now available through ZSE direct. To invest in the ETF, you are required to have an existing account on ZSE direct or a trading account with your stockbroker,” ZSE chief executive officer, Justin Bgoni said.

Zimbabwe joins South Africa, Nigeria, Kenya and Egypt in trading the ETF.

The ETF, whose fund manager is Old Mutual Investment Group, is some form of a derivative because it derives its value from underlying assets.

The difference between ETFs and traditional stocks on the ZSE will be that ETF trades a basket of securities, the Top 10, while shares trade a single company.

Globally, the market for ETFs has grown in the past 10 years.

What makes ETFs attractive is that they are relatively cost efficient as these are relatively passive funds which attract lower fees as compared to traditional managed funds.

ETFs are also said to be transparent given that the underlying assets are fully disclosed to investors in their proportions.

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