The state of the SA Exchange Traded Product Industry

Market Capitalisation

The total market capitalisation of the 77 Exchange Traded Funds(ETFs)/Exchange Traded Notes (ETNs), listed on the JSE, as at 29 September 2017, was R87,5 billion. This was an increase of 18,1% on the market capitalisation of all Exchange Traded Products (ETPs), at the end of 2016, says Mike Brown, Managing Director, etfSA.co.za

Following a period of some stagnation from 2014 to 2016, where the total market value of the ETP industry remained pegged at below R80 billion, the rise in market capitalisation to date in 2017, has been most encouraging, he adds.

The ETP Industry in 2017

Some of the increase in total market size of ETPs listed on the JSE comes from the rise in value of a number of local indices, Brown says. “However, there has also been some activity in the issuance of new Exchange Traded Products, or in raising fresh capital for ETPs already listed.”

Just under R6 billion new capital was raised by such activity for the first 9 months of 2017. The Sygnia/Itrix ETFs which track global indices, but are listed and traded on the JSE in rands, were the biggest raisers of new capital in 2017, for their range of five global ETFs, which have been listed for 8-10 years on the JSE, but enjoyed a new surge in interest from local investors this year.

A newcomer in the ETP market were the custodian certificates issued by First Rand, which have been structured to qualify for listing as ETFs on the JSE Main Board. The Krugerrand custodian certificate ETF has a market capitalisation of R1 466 million, which appears to have been largely made up of the conversion of physical Krugerrands held by their customers to an ETF structure for the more efficient and liquid holding of such assets.

“A few ETPs were delisted in 2017, including the CoreShares Green ETF, which never attracted any significant following and the BNP Paribas GURU ETNs on global market indices, which also failed to gain any traction in the local retail market,” Brown says.

As at end-September 2017, a record number of 77 ETFs and ETNs were listed on the JSE, further signifying the health of the industry.

Barclays/Absa Capital remains by far the biggest issuer of ETPs in South Africa, both by the number of ETPs in issue and by market capitalisation, according to Brown. The bulk of the capital for ETPs issued by Barclays/Absa are commodity ETFs, with NewGold ETF holding the distinction of being the largest ETF on the SA market, with a market capitalisation of R18,4 billion, as at end-September 2017.

Sygnia/Itrix, who took over the DBX Tracker MSCI ETFs in mid-2017, which were renamed the Sygnia/Itrix ETFs in September 2017, have moved into second place in the market capitalisation tables. The five ETFs they have in issue, had a total market capitalisation of R13 994,4 million at the end of September 2017.

Satrix, which had been dormant in the listing of new ETFs, since 2008, returned to the new issuer market in 2017. It has now listed five new ETFs to date in 2017, including global ETFs which track international indices, providing some competition for the well-established Sygnia/Itrix global ETFs.

Deutsche Bank continues to issue Exchange Traded Notes (ETNs), as it only sold its ETFs to Sygnia. These products remain popular with investors as they give access to emerging market indices.

A completely new entrant to the ETF market in 2017 was Cloud Atlas, an empowerment company that, in April 2017, launched the AMI Big 50 Pan Africa (outside South Africa) ETF, which tracks an index of the top 50 companies, in the five most investable African stockmarkets outside South Africa.

“With a number of new issues to date in 2017, and the prospects of a number of further ETFs being issued in late-2017/early 2018, this revival of the Exchange Traded Product industry in South Africa is welcome and hopefully should continue,” Brown concludes.

 

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