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State Street aims to launch Japan's first true gold ETF

Section: Daily Dispatches

By Jim Hawe
Dow Jones Newswires
via CNN Money
Thursday, December 13, 2007

TOKYO -- State Street Global Advisors (Japan) Co. is aiming to list Japan's first true gold-backed exchange-traded fund on the Tokyo Stock Exchange early next year, offering investors here a convenient new way to dabble in bullion, said a company official late Thursday in Tokyo.

"That's the plan. We are looking at maybe the first quarter of next year, and it will be a dual-listing very similar to what we did in Singapore," said David Collins, vice president in charge of marketing with State Street Global Advisors (Japan).

In October of 2006, parent State Street Corp. (STT), a leading U.S. financial services company, began offering its gold-backed ETF on the Singapore Exchange. Its "StreetTRACKS Gold Share," which was already listed on the New York Stock Exchange, became the first gold-based ETF in Asia.

Gold ETFs are designed to track the gold price but are traded on exchanges like shares. They have become hugely popular in recent years, as they offer an easy way to participate in the bullion market, but with the security of a regulated exchange and without the hassle of having to take physical delivery of the metal.

Collins said recent regulatory changes in Japan have opened the door for the listing of new ETF products here.

September revisions to Japan's Trust Business Law and Financial Instruments and Exchange Law loosened some of the restrictions on the listing of investment trusts that incorporate physical commodities.

The Osaka Securities Exchange's version of a gold ETF launched in August, before these revision were made, had to be backed by bonds linked to the gold price and could not be exchanged for physical gold. As such, many investors have considered this bourse's version as not being a "true" gold ETF.

Collins thinks Japanese investors will be eager to add true gold ETFs to their portfolios.

"Demand should be great. There is a very strong desire to diversify right now, and so there should be a great tailwind," he said.

The "Yellow Book" gold market report released earlier this week by Fortis Bank and Virtual Metals Research & Consulting said ETFs will continue to play a key role in supporting gold demand.

The biannual report said ETF demand has been around or above 200 tons for the past three years and forecasts that the total amount of gold held by various ETFs around the world will top 1,000 tons in 2008.

"This estimate could be too low if new products are launched in the Middle East and Asia," the report said.

The "Yellow Book" estimates that in 2007, ETFs will have bought 241 tons of gold, which would mean that this relatively new investment tool will account for 6.3% of the total demand forecast for the year of 3,798 tons.

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