Standard Bank, one of Africa’s largest banks by assets and earnings, has announced the launch of the continent’s first exchange-traded fund to track movements in the US dollar spot price of rhodium. The AfricaRhodium ETF, listed on the Johannesburg Stock Exchange, complements an existing suite of platinum group metal (PGM) ETFs which now offers local investors a more rounded exposure to the PGM industry, of which South Africa is a global leader.
The AfricaRhodium ETF is the second ETF globally to track movements in the US dollar spot price of rhodium and the first such fund to be listed in Africa.
Johann Erasmus, Head of Client Solutions, Business Development at Standard Bank, commented: “By completing the PGM ETF offering, we not only provide investors access to rhodium, the price which is dictated by global supply and demand, but the ability to invest in the full PGM Basket as well. It makes it possible for investors to manage their respective views and market expectations within the PGM mix.”
The AfricaRhodium ETF tracks the US dollar spot price of rhodium but trades in South African rand. Standard Bank launched platinum and palladium ETFs last year. Each ETF is required by local securities laws to be physically-backed; for every 100 ETF units sold, one ounce of rhodium is stored in custodian vaults. The PGM Basket, a reference for average quantities extracted by local producers, consists roughly of 60% platinum, 30% palladium and 10% rhodium, the rarest of the three metals.
Rhodium is used primarily in catalytic converters to clean vehicle emissions into less harmful gases, although the metal is also used extensively in the production of LCD screens and also as plating for jewellery.
The performance of rhodium is thus tied to global car sales, being highly influenced especially by demand from the US and China. Being a rare metal, it may be particularly sensitive to event-driven news as well as developments in environmental regulation as it pertains to diesel or petrol vehicles. Given a relatively higher correlation between platinum, palladium and rhodium, due to each being used in the construction of catalytic converters, the AfricaRhodium ETF may best be suited as part of a diversified holding of commodity ETFs
Mr Erasmus has stated that the bank’s next ambition is to meet the significant demand from regional investors. The AfricaPalladium ETF has already launched on the Namibian Stock Exchange and further plans are afoot to cross-list more PGM ETFs in other jurisdictions. Recent discussions between the stock exchanges of Kenya, Nigeria and South Africa signal an easing of restrictions in this regard and are likely to promote future capital market integration.