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Absa Capital wins regulatory approval for South African palladium ETF

By Jan Harvey

ROME (Reuters) - South Africa's Absa Capital has received regulatory approval for its planned Johannesburg-listed palladium exchange-traded fund and hopes to launch the product by the end of the year, a spokesman for Absa said on Sunday.

The fund will be backed exclusively by palladium sourced in South Africa, Absa's head of investments Vladimir Nedeljkovic said on Sunday on the sidelines of the London Bullion Market Association's annual conference.

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

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

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

The metal, which is chiefly used in autocatalysts, has benefited from growth in car sales in its core markets, the United States and China, as well as speculation that supply from main producer Russia and South Africa could fall.

Nedeljkovic said he expected most interest in the fund to come from institutional investors. "It's primarily going to be an institutional product," he said. "There are several asset managers, large institutional investors in South Africa that are potentially interested."

He said he did not expect the fund to struggle to find metal within South Africa to back the new ETF, saying South African investors' particular affinity with platinum meant the new fund would probably grow more slowly than NewPlat.

"In principle it's more complicated, just because of the fact that only 30 percent of global palladium supply is South African, rather than 80 percent," as it is for platinum, he said. "But we've worked on this for a while, so it's not likely to be a problem."

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

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

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

(Reporting by Jan Harvey; Editing by David Cowell)

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