Rikus Grobler | Feb 8, 2018 | 0
RMB’s first taste of capital market’s deceptive sweetness
A day before annual inflation jumped to 8.2% with the highest monthly rate in 14 years, Selma Kapeng, the Head of Global Markets at RMB Namibia announced the company’s entry into the local capital market by issuing a 5-year Inflation linked Bond through a so-called private placement.
With this maiden bond, RMB joins its parent, FNB Namibia who has six NSX-listed bonds.
Known as the FNB ILB, RMB stated that the bond is to grow the fixed income market as an inflation-protected alternative asset to government debt. The FNB ILB replicates the existing five-year Government Inflation linked bond, the GI22.
RMB believes local inflation will remain above 6% per annum for the next three semesters, stating this as one of the reason why their new bond should be an attractive hedge. The semi-annual coupon payments and final nominal amount are designed to track the movements in price levels.
“This landmark product is the first of its kind in our local market and has attracted significant institutional interest, both locally and internationally,” Kapeng said.
“The growing popularity of ILBs is attributed to the rising demand for inflation protection. Aside from being an inflation hedge, ILBs are weakly correlated to other risk assets, thereby lessening volatility and increasing diversification within a multi-asset class portfolio, particularly in times of economic uncertainty and market stress.
The Replica bond is a great innovation and is in line with RMB’s mission to be the fixed income house of choice in Namibia,” added Kapeng.
“ILBs can provide value to a host of Namibia’s investors pursuing diverse strategies, such as pension funds and insurance companies, which could apply linkers to liability-driven investment strategies and asset managers who can use them to generate alpha. We are very excited about prospects that a product like this will bring to our growing financial market” she concluded.
RMB Namibia, a division of FNB Namibia Limited, is part of the FirstRand Group.