Affin Hwang AM launches Malaysia's first syariah-compliant commodity ETF

KUALA LUMPUR: Affin Hwang Asset Management Bhd (Affin Hwang AM) believes that its newly listed gold exchange-traded fund (ETF), called TradePlus Shariah Gold Tracker, will grow to RM100 million to RM200 million within a year.
The fund, which is Malaysia’s first syariah-compliant commodity ETF, closed at RM1.74 on its debut on the Main Market of Bursa Malaysia yesterday, a premium of 1.46% or 2.5 sen over its issue price of RM1.715 sen. A total of 827,100 shares were traded.
Speaking at a press conference after its listing ceremony, Affin Hwang AM managing director Teng Chee Wai said the company believes that investors would seek gold as a safe-haven asset, especially during global economic uncertainty and volatility in the market.
“When people start to chase gold as an asset class during (global) uncertainty, that is when we think the ETF will grow massively in size.
“Therefore, we see that it is important to reach a much wider audience and create the awareness that gold ETF does provide good diversification for the investors’ portfolios,” he added, noting the fund is targeted at both institutional and retail markets.
Teng noted that the company previously invested RM20 million of its shareholders’ funds in the ETF as seed money.
The fund, which aims to closely track the performance of gold prices, will invest a minimum of 95% of the fund’s net asset value in physical gold bars purchased from London Bullion Market Association (LBMA) accredited refineries.
The remaining 5% will be invested in Islamic money market instruments and/or Islamic deposits for liquidity purposes.
Investors can buy and sell units throughout the trading day like any other publicly traded shares, with a minimum board lot size of 100 units. They are provided with an option for physical redemption, for a minimum redemption unit block of 500,000 units which is equivalent to an estimated 5kg of gold.
“With no similar offerings, the fund is the first of its kind in the domestic market which will provide investors with a low-cost and efficient entry point to gain exposure to gold,” Teng said.
Commenting on the performance of gold, he said the commodity remains one of the most popular form of investments and is proven to be a quality long-term store of value.
He added that gold’s role as a natural hedge and its low correlation to other asset-classes will allow investors to diversify their portfolios effectively by reaping better risk-adjusted returns and lower portfolio volatility.
“For the time being, the price of gold will probably rangebound at about US$1,300 an ounce,” Teng said.
Based on the LBMA Gold Price AM Index, gold is trading at about US$1,275 (RM5,189) an ounce, up from US$1,100 in 2015.