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-- Edited by tfwee at 23:16, 2007-04-10

BT, October 11, 2006, 8.12 pm (Singapore time)

S'pore's gold-backed security starts trading

SINGAPORE - StreetTracks Gold Shares, the world's largest gold exchange-traded fund, started trading on the Singapore Exchange on Wednesday in a move to attract more investors into the bullion market. The fund, Asia's first gold-based ETF, opened at US$57.60, hit a high of US$57.70 and ended at US$57.30. Volume totalled 9,140 shares, compared with around 3,400 shares when trading started.

ETFs enable investors to achieve a return based on commodities prices by trading securities on an exchange, without the need to trade futures or to take physical delivery. StreetTracks is the World Gold Council's New York Stock Exchange-listed product, with an average daily volume of around US$400 million and assets in excess of US$7 billion.

'The first day of trading proceeded quite smoothly, and we are seeing some good activity on the screen,' said Hon Cheung, managing director of State Street Global Advisors. State Street is the investment management arm of State Street Corp, a US-based financial services company, and acts as a marketing agent for StreetTracks in Singapore. 'One of our target focus groups are a lot of retail investors, and actually we are seeing some good retail-type transactions coming through. We are also targeting institutional investors,' he said. StreetTracks was launched in 2004 and is designed to track the price of gold and trade like any common stock on an exchange.

'I've already seen some spot buying from my colleague in Sydney who markets the product,' said a dealer at an investment bank in Singapore.

The shares are backed by physical gold and denominated in US dollars. Investors can buy as little as one lot of 10 shares, with each share priced approximately one-tenth of the spot price for an ounce of gold.

Other gold ETFs are in the United Kingdom , Australia and South Africa. Barclays Global Investors' iShares COMEX Gold Trust is listed in the United States. There are also gold ETFs in Mexico, Switzerland, Turkey and France.

Gold hit a 26-year high of US$730 an ounce in mid-May as investors diversified into precious metals on global security concerns, uncertainty about the dollar's outlook and rising energy costs. -- REUTERS

BT, Published September 6, 2006

Largest Gold ETF seeks S'pore listing

StreetTRACKS Gold Trust, whose assets rose almost 70% in 2006 alone, is one of the fastest growing US-listed exchange traded funds.

THE preliminary prospectus for StreetTRACKS Gold Trust - the world's largest gold exchange traded fund (ETF) - has been lodged on the Monetary Authority of Singapore's Opera website for public viewing, paving the way for its expected secondary listing here in October.

Gold ETF, listed on the New York Stock Exchange in 2004, has since grown to more than US$7.8 billion, making it one of the fastest growing US-listed ETFs. Thanks to intense interest in gold among individuals, traders and institutions, the fund's assets rose almost 70 per cent in 2006 alone. Singapore is set to be the fund's second secondary listing after Mexico.

The listing here in October is said to be a coup for the Singapore Exchange, which has been stepping up its efforts to educate investors on ETFs. For instance, the first offshore India ETF here, iShares MSCI India fund, was listed this year. So far eight ETFs have listed in Singapore, including SPDRs tracking the S&P 500, and StreetTRACKS STI tracking the Straits Times Index.

ETFs are tracker funds that invest in the component stocks of an index and are listed on an exchange. They enable investors to gain exposure to an asset class or geography at very low cost. Typically, investors need not to pay a sales charge, unlike with a unit trust. They are, however, subject to a brokerage charge and a bid/offer spread when buying or selling. The total expense ratio is typically a fraction of that of unit trusts. StreetTRACKS STI, for example, has an expense ratio of just 0.3 per cent compared with more than 1.5 per cent in annual management fees for an actively managed fund.

Instead of stocks, the StreetTRACKS Gold ETF will hold gold bullion as its underlying assets. Based on data on www.streettracksgoldshares.com, the fund now holds 12.6 million ounces of gold. The ETF's pricing is based on roughly one-tenth of an ounce of gold. On Sept 1, for instance, the ETF closed at US$62.14 per share, against its net asset value of US$61.67. Gold's spot price was quoted at US$631.3 per ounce yesterday. The fund has an expense ratio of 0.4 per cent.

It is unclear whether investors will be able to use CPF funds to buy shares of StreetTRACKS Gold ETF. Asked about this, CPF said any ETF seeking inclusion must meet its criteria and comply with investment guidelines. 'In the case of the gold ETF, if its underlying assets are invested in a single asset class, ie physical gold (of at least 999 fineness), it would be subject to the 10 per cent investible savings limit instead of up to 100 per cent of investible savings for ETFs that invest in a diversified portfolio of stocks and/or bonds,' CPF said.

Interestingly, CPF members who invested in gold are the happiest. In the fiscal year ended September 2005, CPF members sat on paper profits of 42 per cent on their gold holdings, compared with their entry costs. That was the biggest profit of any asset classes, although the market value of a total of $10 million was modest.

For individual investors, the ETF offers a convenient way to buy gold with relatively modest sums, without incurring custody, storage and insurance charges that typically accompany bullion investments. Among local banks, only UOB offers gold savings facilities. (see accompanying graphic for details). Purchase of physical gold also incurs GST of 5 per cent.

Hon Cheung, managing director of State Street Global Advisors (SSGA), says: 'ETFs could potentially reach a wide audience of the financial planning community, private banks, product structurers and retail investors. As (individuals) become more adept in their understanding of financial products, they think less of the next hot investment topic and begin to see this (ETF) as a way to help them manage their wealth.' SSGA is the ETFs marketing agent. It also marketed the StreetTRACKS STI.

Gold has been rising steadily since its low of US$254 in 1999, thanks to worries over inflation, a weak US dollar and the intense search by institutions and pension funds for assets that are not correlated with traditional stocks and bonds.

This year, gold has corrected steeply from a high of US$727.68 in May, but fund managers remain bullish given the tight supply situation. Interestingly, a number cite the runaway growth of gold ETFs as a major underpinning for gold prices.

Says UOB Asset Management's Alfred Wong, who manages the firm's gold and resources funds: 'ETFs have to buy physical bullion. That has helped to strengthen gold prices. . .My view of gold has always been linked to fundamental demand and supply. People are buying gold for a number of reasons, as a hedge against a weaker US dollar or portfolio insurance. And supply remains challenging in terms of quantity and quality.' He expects gold spot prices to end the year at between US$750 and US$800 an ounce.

A gold ETF may be suitable for investors who want to ride on the physical rise of gold, he says. 'But we hold the view that if you want beta and a leveraged multiplier effect, you get that with gold equities funds.'

Hedge fund manager David Crichton-Watt of Aims Asset Management, who runs a gold fund, says the ETF is ideal for individual investors. His US$80 million fund invests in gold equities and has around 11 per cent invested in bullion for now.

'Virtually all major countries have such an indebtedness problem or pension obligations that the only escape is to inflate away their debt,' he says. In an April commentary he wrote: 'We are convinced that bullion will continue to rise against all currencies for many years with, of course, the occasional bone-chilling correction. . .We will try to take defensive action whenever we anticipate severe profit taking but we believe we are nowhere near the euphoric stage when we must think of final withdrawal.' As at end-August, the firm's Phoenix Gold Fund had returned a whopping 882 per cent since inception in 2001, or an annualised return of 58 per cent.

Citigroup Private Bank director Hans Goetti says there is likely to be interest in a gold ETF among clients. 'In our model globally there is no gold component, but clients some want to take up some insurance policy. They may put a small percentage of their funds in gold.'