This archive report was first published on 23 October 2019.
On September 1, 2017, Kenya's Supreme Court annulled the August 8 presidential elections, triggering a decline in the NSE 20-share index by more than five percent and a trading halt.
However, the Barclays NewGold Exchange Traded Fund (ETF) remained relatively stable, with major counters dropping between six to 9.5 percent.
As Peter Onyango explains, an ETF is a type of fund that owns assets like stocks, commodities, or futures, but has its ownership divided into shares that trade on stock exchanges.
Investors can buy and sell ETFs during trading hours at low costs, making them an attractive option for diversification.
The Barclays NewGold ETF is the only ETF listed at the Kenyan bourse, with 400,000 units worth Sh500 million allocated for trade.
Despite its potential, the ETF has only sold 12,600 units worth Sh15.8 million since its listing on March 27, 2017.
However, as Onyango notes, the ETF market growth was initially slow in South Africa, but its popularity later soared after the 2008 global financial crisis.
Kenya's fund managers should consider allocating between 5-10 percent of their investment portfolio to gold ETFs for diversification purposes.
The relatively small number of units available for trade in Kenya would need to be increased to provide sufficient product for such a scale of investment.
As Onyango explains, the beauty of an ETF is that more units could be issued at any time through the acquisition and storage of an equivalent value of gold bullion.
