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Launch of Physical-gold ETF soon for boost in market efficiency

Krung Thai Asset Management and Hua Seng Heng Gold Futures, in cooperation with the Stock Exchange of Thailand, will launch the physical-gold ETF, Kesara Manchusree, managing director of the Thailand Futures Exchange, said yesterday.

The SET will invest about Bt20 million in the fund under its policy to support ETF launches, for which about Bt100 million has been approved for investment in five funds.

The SET is in discussion with brokerages and gold traders on whether 96.5-per-cent or 99.9-per-cent gold will be used for the fund’s trading reference.

The physical-gold ETF will trade and deposit gold in Thailand, with commercial banks acting as custodians of the metal.

Currently, securities firms trading gold funds deposit the precious metal at the New York Commodities Exchange, which is the global gold-trading market.

However, having a local physical-gold ETF could help improve market efficiency in Thailand. Aside from being an investment alternative, the fund could also be used in arbitration.

Meanwhile, the first SET-invested ETF, the KTAM Gold ETF Tracker (GLD), is expected to be listed on the stock exchange in July, said Somchai Boonnamsiri, chief executive officer of Krung Thai Asset Management, the manager of the fund.

The fund will track with SPDR Gold, listed on the Hong Kong bourse, and investors will be able to trade its units in real time.

The fund’s registered capital amounts to Bt3 billion and it has been approved by the Securities and Exchange Commission.

The initial-public-offering price is likely to be Bt2 per unit. The subscription period is expected in July, with the likely first trading day in the same month

Somchai said that in the past 10 years, gold had yielded a 429-per-cent return, while crude oil had generated 336 per cent and stock markets 237 per cent.

Tanarat Pasawongse, managing director at Hua Seng Heng Gold Futures, said the price of gold had risen continuously both at home and abroad, as concern about Europe’s deepening debt crisis spurs demand for the protection of wealth.

Standard and Poor’s recent statement that Italy’s debt rating was at risk of a downgrade and concern over the US economic recovery have driven funds across the world to invest in gold funds again. Last week, gold funds increased their holdings of about 20 tonnes, boosting the world gold price to US$1,525 (Bt46,450) an ounce and the local price to Bt21,950 per baht weight, near to the all-time high.

“The local gold price rose more than the global price due to baht depreciation in the last couple of days. The local price is expected |to exceed Bt22,000 [per baht weight]. Despite the high price, investors in the Yaowarat area |are barely selling gold, but are buying more on expectation of further rises. Hua Seng Heng expects the gold price to stay in a range of $1,550-$1,600 an ounce,” Tanarat said.

He added that local gold had yielded a return of about 6 per cent since the beginning of the year.

Gold could advance to a record $1,600 an ounce this year as investors seek to protect their wealth from Europe’s sovereign-debt crisis, boosting demand, according to Bloomberg, which quoted Scotia Capital

Source: The Nation

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