RMB lists new dollar product in the JSE
IN A first for South Africa, Rand Merchant Bank (RMB), a division of FirstRand Bank, said yesterday that it had listed dollar custodial certificates (DCCs) on the JSE, thus enabling companies and individuals to hold unlimited quantities of cash in US dollars.
DCCs, which listed on the Exchange Traded Funds sector of the JSE yesterday, could be a simplified hedge against the rand’s depreciation, according to RMB alternative asset specialist Ebrahim Patel.
He said the certificates allowed companies and individuals to invest in US dollar-linked assets without requiring the permission of the SA Reserve Bank. “And there is no limit to the investments as well,” Patel said.
Patel said DCCs were easily tradable, dollar-denominated investment instruments which had no exchange control implications. Each certificate could cost $1000 (R13 317).
RMB said investors would earn the return of a US Treasury note, receiving an income stream in US dollars, which would be settled in rands. RMB, which created, issued and listed the instruments, would act as the market maker providing liquidity in the product, the company said.
It said DCCs represented the first inward listing of US Treasury notes on the JSE, giving investors direct exposure to the Treasury notes. Investors’ credit exposure would be to the US Federal Reserve giving them protection from the possible insolvency of a bank.
“Investors are able to invest in a global currency, therefore avoiding the potential devaluation of their rand savings and working capital.
“DCCs will therefore benefit investors who take the view that investing in dollars may preserve their assets, while businesses can take advantage of a dollarised working capital solution,” Patel said.
He said RMB chose the dollar because it was a well-known currency. “It is a currency of international trade. It has a bearing on our inflation.”
The JSE earlier this month gave FirstRand Bank the green light to list 10 000 DCCs.
“Businesses and individuals may invest without limit, enabling excess cash to be dollarised. The DCCs are liquid and freely traded, making them an ideal working capital solution. Investment performance is directly related to the (dollar/rand) exchange rate and the price performance of US Treasury notes,” the JSE said.
Rand Merchant Bank’s shares on the JSE yesterday inched up 0.42percent to close at R67.29 a share.