Affin Hwang Capital Research Highlights

Author: kltrader   |   Latest post: Fri, 8 Nov 2019, 8:45 AM


ETF Watch - TradePlus Shariah Gold Tracker (BUY)

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  • From 29 November 2017 to 31 December 2018, the TradePlus Shariah Gold Tracker had underperformed the LBMA Gold Price AM by 1.42% due to transaction costs and fees and expenses of the Fund, as highlighted in the Fund’s Annual Report.
  • Upside to gold prices may arise from expectations of slowing global economic growth, Brexit uncertainties, and potential pause in Fed’s rate hike path
  • However, downside risk may stem from easing trade tensions between US and China and possibility of a steady US Dollar

Performance of the Fund

As highlighted by TradePlus Shariah Gold Tracker’s first annual report since its inception on 28 November 2017, covering the period from 29 November 2017 to 31 December 2018, the TradePlus Shariah Gold Tracker (the Fund) had registered a decline in return of about 2.37%, compared to the LBMA Gold Price AM (the Benchmark) with a decline in return of about 0.95%. It was also highlighted that the TradePlus Shariah Gold Tracker had underperformed the Benchmark by 1.42%, attributed to the transaction costs and fees and expenses of the Fund.

As at 31 December 2018, the Fund’s Net Asset Value (NAV) per unit was US$0.4208 compared to US$0.4310 as at 28 November 2017. The Fund’s NAV as at 31 December 2018 was at US$10.352mn or RM42.772mn. Cash flow during from 28 November 2017 to 31 December 2018 was US$22,311 compared to US$42,622 as at 31 December 2017 (US$67,999 as at 30 September 2018), due to payment for fees and expenses.

There was no income distribution or unit split declared for the financial year ended 31 December 2018. The Manager invested 99.9% of the fund’s NAV (invested in physical gold bars), while the balance of 0.10% was kept in cash as at 31 December 2018.The number of units in circulation was 24,600,000. The management expense ratio was at 1.16%.

Some Reasons Gold Prices Declined in 2018

The lower return on both the Fund and the benchmark in 2018 was due to the weaker performance of gold prices. Numerous headwinds on gold prices were present such as the rebound of the US Dollar Index of 4.2% in 2018 following a deprecation of 10.9% in 2017, as a result of interest rate hikes by the US Fed, despite other major central banks like the European Central Bank (ECB) and Bank of Japan (BoJ) maintaining their policy rates unchanged. Besides that, the US economic growth also reached a threeyear high of 2.9% yoy in 2018 from 2.2% in 2017, partly as a result of the Trump Administration's tax cuts.

Upside Risk

As for upside risk on gold prices, we continue to believe that uncertainties on the global economic front may continue to drive safe haven flows into gold. This will stem from expectations of slower global economic growth, as guided by both the World Bank and IMF of 2.9% and 3.5%, respectively in 2019 (3% and 3.7%, respectively in 2018), citing slowing international trade and investment, while trade tensions remain and financing conditions are tightening. The OECD had also recently revised its global growth outlook downwards to 3.3% in 2019 due to high policy uncertainty, ongoing trade tensions as well as falling business and consumer confidence.

Source: Affin Hwang Research - 12 Mar 2019

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