Absa Capital wins regulatory approval for SAfrican palladium ETF

Reuters

* Absa plans to launch palladium ETF before end 2013

* Absa platinum fund became world's biggest in 4 months

* Palladium will be exclusively sourced in South Africa

By Jan Harvey

ROME, Sept 29 (Reuters) - South Africa's Absa Capital hasreceived regulatory approval for its planned Johannesburg-listedpalladium exchange-traded fund and hopes to launch the productby the end of the year, a spokesman for Absa said on Sunday.

The fund will be backed exclusively by palladium sourced inSouth Africa, Absa's head of investments Vladimir Nedeljkovicsaid on Sunday on the sidelines of the London Bullion MarketAssociation's annual conference.

"We have regulatory approval, and we're now basically justfinalising a couple of small things," Nedeljkovic said. "Wedefinitely want to list before the end of the year."

A similar fund backed by platinum that Absalaunched in April saw huge inflows from investors, growing injust four months into the world's biggest platinum-backed ETF bymetal under management.

Palladium has been the best performer of the mainprecious metals this year, with prices up 3.5 percent since theend of 2012, compared with an 8 percent drop in platinum pricesand a 20 percent fall in gold.

The metal, which is chiefly used in autocatalysts, hasbenefited from growth in car sales in its core markets, theUnited States and China, as well as speculation that supply frommain producer Russia and South Africa could fall.

Nedeljkovic said he expected most interest in the fund tocome from institutional investors. "It's primarily going to bean institutional product," he said. "There are several assetmanagers, large institutional investors in South Africa that arepotentially interested."

He said he did not expect the fund to struggle to find metalwithin South Africa to back the new ETF, saying South Africaninvestors' particular affinity with platinum meant the new fundwould probably grow more slowly than NewPlat.

"In principle it's more complicated, just because of thefact that only 30 percent of global palladium supply is SouthAfrican, rather than 80 percent," as it is for platinum, hesaid. "But we've worked on this for a while, so it's not likelyto be a problem."

South Africa is the world's second largest producer ofpalladium after Russia, with output of 2.33 million ounces lastyear, or about a third of global supply.

Precious metals ETFs, which issue securities backed byphysical stocks of a given commodity, have proved a popular wayto invest in the sector since they were launched a decade ago.

There are currently around 1.8 million ounces of palladiumheld in ETFs, and nearly 2 million ounces of platinum. Nearly athird of that platinum, just under 659,000 ounces, is held bythe NewPlat ETF operated by Absa.

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