The Johannesburg Stock Exchange (JSE) yesterday welcomed the Satrix SA Bond ETF to the main board of the JSE in its first virtual listing, and the first ETF listing in 2020.
The Exchange Traded Fund (ETF), will track the S&P South Africa Sovereign Bond 1+ year Index, which allows investors to automatically re-invest their coupons. The index is market value weighted and consists of bonds with maturities of one year or more.
Valdene Reddy, director of capital markets at the JSE, says the ETF was perfectly suited for investors needing a more defensive asset class while chasing inflation-beating yields and capital growth.
“The ETF offers investors an opportunity to invest in a basket of Rand-denominated sovereign debt publicly listed by the government of South Africa. This offers investors alternatives and significant diversification to their investment portfolios,” says Reddy.
The Satrix SA Bond ETF is the sixth local Bond ETF to list on the JSE – thus opening up even wider choice for investors in search of debt exposure, in a single instrument.
The JSE’s total ETF market cap is close to R95-billion with current average daily value traded being R600-million per day, almost three times the average daily value for 2019. The total year to date value traded has been in excess of R50-billion, almost equal to the total value traded in 2019.
The evolution of South Africa’s ETF landscape over the last 20 years has been remarkable with the JSE now offering 74 different types of ETFs, ranging from broad market equity exposure, local and global debt, equity and property exposure, access to precious metals, Africa (ex-SA) equity ETFs and Smart Beta ETFs.
“In these significantly volatile environments, trading instruments such as ETFs, offer attractive and diverse opportunities for investment,” says Reddy.
Helena Conradie, Satrix CEO, says over the last few years, Satrix has spent considerable time making sure that its wide range of ETF products, offered a broad-range of alternatives to cater for all investors.
“We now offer ETFs covering most asset classes both locally and globally. Needless to say, COVID-19 has forced all businesses to completely rewrite their 2020 plan. Satrix is fortunate that we can still go ahead with most of our planned listings this year, despite the turmoil. This demonstrates our belief in the future of South Africa,” says Conradie.
With various economies around the world under economic lockdown in efforts to minimise the spread of Covid-19, Reddy notes that investors are nervous and cautious in such markets. The appeal of ETFs are further enhanced in an environment of uncertainty in the market, as well as the global growth towards passive investing.
“A basket solution helps to address those concerns and supports investors with the ability to invest in local assets or foreign assets, which are all available on the JSE,” says Reddy.
Satrix head of exchange traded products, Yusuf Wadee, encourages investors to invest in South African government bonds to diversify their portfolios.
“This ETF offers that diversification, along with attractive long-term yield prospects. And of course, the ETF structure allows for easy access in a single trade,” he says.