The Star Early Edition

RMB lists new dollar product in the JSE

- Siseko Njobeni

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.

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