RMB lists new dol­lar prod­uct in the JSE

The Star Early Edition - - BUSINESS REPORT - 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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