“NewGold is introducing initially only about 400,000 securities, which is a block. And that first block will be traded initially, and then if there is a market demand and they feel that there is a need for introducing further blocks of NewGold shares on the Mauritian Exchange, they will do so,” Stock Exchange of Mauritius CEO Sunil Benimadhu told CNBC Africa on Thursday.
“So initially the market capitalisation of NewGold, which will be listed, will be only related to the 400,000 securities that NewGold will bring to the market.”
According to Benimadhu, The Stock Exchange of Mauritius underwent a fundamental reorientation of its development strategy three years ago. This was in an effort to move away from what had historically been an equity-centric domestic exchange which catered for local companies to an internationalised stock exchange and multi-asset platform.
A number of reforms were then introduced to the listing and trading platform to open up to new products other than the local products that existed on the stock exchange. Discussions between ABSA and the Mauritius Stock Exchange were then initiated before NewGold was introduced into the island’s trading platform.
The Stock Market of Mauritius now aims offer a new asset class within the existing spectrum of products and add diversification opportunities for investors.
“This fits very well with Mauritius’s will to become a service platform, an international financial centre and to do that we would need to increase the gamut of products that are listed and traded on out platform,” added Benimadhu.
NewGold, which is the largest ETF in South Africa, will be open to institutional and individual retail investors.
“Our strategy was to expand our offering to other African jurisdictions and we’ve listed NewGold over the years in Botswana, Nigeria, Ghana. Mauritius was an obvious place for us. First of all, the market here is quite dynamic. We have very good partners with the exchange, who are really trying to do some innovative and interesting stuff,” ABSA Capital head of investments Vladimir Nedeljkovich.
“So we also experience quite a lot of demand, particularly in the institutional market, in the pension fund industry and asset managers for this type of product and I think the Mauritian institutional investors have some experience in investing in gold.”
100 shares in NewGold is the equivalent of one ounce of gold and the product is fully backed by physical gold. The physical bullion is currently being held by NewGold custodian Barclays Bank in London.
Listings are also in the pipeline for Zambia and Uganda and under local rules, Mauritian investors can invest in bullion.
Ten months ago, Mauritius introduced a multi-currency listing and trading platform, where a product can be listed in US dollars, British pounds, euros and South African rand from the Stock Exchange of Mauritius.
The products can also be traded in the underlying currencies and transactions can equally be settled. This will allow for the international investor to trade in African products in the listed currencies without having to incur local currency risk.