Johannesburg - A platinum exchange traded fund (ETF) in South Africa was viable but the government must relax exchange controls and alter the pension fund law to allow investors to put their money into commodities, experts agreed yesterday.
An ETF is an investment vehicle that gives investors access mainly to the movements in stock indices as well as commodity prices. The boom in prices of commodities, including platinum, has resulted in a rising number of ETFs around the world.
Satrix general manager Mike Brown said the key to the success of an ETF was liquidity. Exchange control regulations also stood in the way of a platinum ETF, as South Africans were not allowed to own or trade in platinum metals.
Vladimir Nedeljkovic of the Absa Corporate and Merchant Bank, which launched a gold ETF in November 2004, said regulations in the pension fund act needed to be changed to allow investors to invest in commodities, to make the platinum ETF viable.
Thoraya Pandy, a national treasury spokesperson, said it had received no application for listing a platinum ETF. "The national treasury will consider the facts on a case-by-case basis, on their merits, should such an application be received in the future," she said.
Nedeljkovic said yesterday that for the bank to cover the costs of running a metal ETF, at least R200 million would need to be invested. The value of the gold ETF's holdings had grown from less than R300 million to nearly R2 billion in 18 months, he said.
Investec Asset Managers head of resources, Daniel Sacks, said that given the money attracted to the gold ETF, R200 million could be attracted to a platinum ETF. A Johannesburg analyst said that R200 million sounded like a fair number, given the amount of funds that had been attracted to the gold ETF.
Sachs said: "The prospects for platinum are good. If they market it well, then they could win some money."
Investec Asset Managers could easily invest in a platinum ETF but would prefer to invest in platinum mining stocks, he said.
"There are some attractive hedge fund trades that could be executed using a platinum ETF," he added.
The Johannesburg analyst said that over a number of years platinum stocks had outperformed the platinum price, largely due to the fact that platinum mining companies were exposed to a basket of platinum group metals (PGMs).
A platinum ETF would present lower risk than platinum mining shares, which were leveraged to the price of PGMs and paid dividends.
Late last month the first platinum ETF was launched in Europe by ETF Securities, with listings in the UK, France, Germany and Holland.
A Swiss bank, Zurich Cantonal Bank, launched ETFs for platinum and palladium this month. Within weeks these ETF listings have attracted about 43 000 ounces of platinum worth nearly R400 million.
ETF Securities had looked at South Africa as a place to launch its ETF products, said marketing and sales director Hector McNeil.
For a platinum ETF to be established, a relationship would have to be set up with a platinum refinery run by a major mining company, like Anglo Platinum (AngloPlat), Impala Platinum (Implats) or Lonmin, Brown said.
AngloPlat has said it would refuse to supply platinum ETFs with metal, while Implats expressed concern that such an investment vehicle could overheat an already tight global market for platinum.
Alexandra Shorland-Ball of Lonmin said the firm sold 85 percent of its platinum on contract.
"We would consider any approach within the context of our marketing book. Our preference would be to sell to customers," she added.