The increasing popularity of ETFs (exchange traded funds) has been one of the notable trends in Singapore investing over recent years. It boils down to the fact that ETFs are a super-easy way to gain exposure to the markets you want to. The stats stack up to suggest the trend has some way to go. The combined AUM (assets under management) of all ETFs listed in Singapore has exploded by 57% from S$5.49bn in 2019 to a total of S$8.60bn just 12 months later. Combined turnover of Singapore ETFs also increased by 2.5 from 2019 levels, reaching S$5.41bn in 2020.
In some respects, the party has only just started. It wasn’t until 2019 that Singapore authorities reclassified ETFs as ‘retail’ instruments and opened the way to smaller investors getting involved. As of 29th January, there were 51 ETFs listed in Singapore. That number looks ready to head north as more and more products coming to the market. This consumer demand has resulted in further brokers supporting traders who want to trade ETFs. This review will pick out a few of the best ETFs and give a steer on where and how to trade them.
Bond markets do lack some of the fireworks associated with higher volatility markets. But as ETF investing is, for many, a way of balancing out risk and returns, fixed income ETFs are a good way to demonstrate the role ETFs can play in an investment portfolio.
For many investors, slow and steady wins the race. Even those with more aggressive risk profiles might still find space for some bond ETFs, even if to avoid the cost of holding wealth in cash form.
The ABF Singapore Bond Fund Index is a way to get exposure to the fixed income assets of a group of government and government-linked organisations. The ETF manager takes positions in Singapore Savings Bonds, Temasek Holdings Bonds and the Temasek-linked Astrea IV and V Bonds. The fund has been operating for more than a decade, so has enough of a track record for potential investors to be able to carry out effective due diligence. In performance terms, the fund has demonstrated resilience and, even during volatile market conditions, it has performed well.
While the upside is limited, so too is the downside risk, and with an expense ratio of just 0.26%, it’s an obvious candidate for those looking to improve on returns found at cash savings accounts.
Nikko Asset Management registered address: 12 Marina View, #18-02, Asia Square Tower 2, Singapore 018961. Tel: +65-6500-5700, 1-800-535-8025
The Lion-OCBC Securities China Leaders ETF is a way to tap into the growing influence of China in the global economy. As a lot of Chinese growth has been relatively recent, there is higher price volatility in some stock names than those in more ‘established’ markets.
This ETF aims to replicate, as closely as possible, the performance of the Hang Seng Stock Connect China 80 Index before expenses. It uses a policy of direct investment, investing substantially, or in all of the underlying Index Securities. The fund manager does the legwork and investors get the exposure they want with a management fee of 0.45%.
Saxo Markets Singapore registered address: 3 Church St, #30-00 Samsung Hub, Singapore 049483. Tel: +65 6303 7800.
The China Leader ETF was launched in August 2021.
CMC Markets has been operating for more than 30 years and attracts discerning investors. Around 98% of CMC client accounts with open positions on Global X Lithium & Battery Tech ETF are currently long and expect the price to rise in conjunction with the interest in the sector.
The fund’s investment mandate covers the whole spectrum of the industry, from mining lithium, refining the metal and battery production. It also cuts across geographical boundaries. With demand for the product surging, there is potential for bottlenecks in the supply chain, which might favour one particular group of operators, such as refiners. By covering all bases, this ETF aims to ensure investors achieve a return that reflects broad growth across the market.
Lithium battery technology is a core element of the move to electric vehicles (EVs), with the renewable energy element of the proposition putting the sector in a good position to tap into the move away from carbon fuels. This is reflected in the prices of the fund’s underlying assets surging. In the 12 months up to 30th June 2021, the fund NAV increased by 130%.
CMC Markets Singapore registered address: 9 Raffles Place, #30-02 Republic Plaza Tower I, Singapore 048619.
A large chunk of the Singapore ETF market is devoted to property investments and REITs.
The Lion-Phillip S-REIT ETF investment’s objective is to replicate the performance of the Morningstar Singapore REIT Yield Focus IndexSM as closely as possible before expenses. The Index is intended to screen for high-yield REITs, which translates into a dividend income that can be invested back into the fund. The properties targeted are chosen because they are of superior quality and in good financial health.
ETF manager Lion Global Investors Ltd has the registered address: 65 Chulia Street, #18-01 OCBC Centre, Singapore 049513.
Investing in ETFs is not about ‘gaming’ the system. That’s why tracker ETFs that follow the performance of major stock indices are amongst the most popular markets on the platforms.
The SPDR S&P 500 ETF is the largest ETF in the world and a perfect example of an instrument many invest in to try to generate a healthy return on their capital but cap downside risk.
The S&P 500, which is made up of the largest 500 firms across the globe, is available in ETF format. The manager monitors the markets and buys the 500 constituent members so that clients can get exposure to them with one click of a button.
Nothing can be guaranteed, but the S&P 500 ETF has rebounded to now trade above the price levels seen prior to the COVID-crash of March 2020. As of 16th August, it was posting at 31.24% one-year return. It is made up of some household staples such as Caterpillar, Colgate-Palmolive and Costco but also contains a range of tech stocks, including Amazon and Intel. Another benefit of trading in such popular markets is that trading fees are super-low, with the expense ratio coming in near 0.09%.
Trustee: State Street Global Advisors Trust Company Channel Center, 1 Iron Street, Boston. MA 02210
Setting up an account to trade ETFs is a painless experience. Online brokers have embraced the market, and while not all brokers offer ETFs, most of the most reputable ones do. This list of trusted brokers is a good place to look for the information needed to build a shortlist of candidates for your investment. It can take only minutes to set up an account, the registration process is all online and ETFs are considered a relatively low-risk proposition when compared to some more volatile markets.
Once set up, ETFs can also help diversify risk by spreading capital allocation across a number of firms. If you want to take a position in stocks related to the gold market, commercial property bonds or high-dividend Singapore stocks, you can do so by taking a single position into an ETF and avoid the hassle of buying each individual stock separately.
The ETF manager is responsible for ensuring the stocks in the basket match the overall investment mandate, but they don’t actively manage the portfolio. The neat thing about this passive management approach is that ETFs are incredibly cost-effective. This is particularly the case when compared to managed funds, which rely on an individual or investment team to get the calls right, but with no guarantees that they will.
They’re well set up for regular investments, with many individuals placing funds into them using a monthly payment plan. Drip-feeding cash into the market can result in less volatile investment returns as it irons out some of the natural short-term peaks and troughs of share price moves.
Investing in Singapore is a hot topic at the moment. Many tip the country to lead the rebound from the COVID-19 pandemic and the buoyant economic situation has spilt over into the ETF market.
While Singapore was seeing the AUM of its ETF market double in size between 2018 and 2021, the Hong Kong market in the instruments grew by only 2.6% over the same time period. Investors in Singapore looking to gain exposure to the domestic economy or international markets, could do worse than tapping into ETFs for a middle-of-the-road approach to costs and risk return.
Backing the right trends is one of the secrets of successful investing and Singapore ETFs are hard to ignore. As with all investing, there is operational as well as market risk to consider, so choosing a good broker is the essential first step to take. While investors can’t influence market prices, they do have complete control over broker selection and finding the best fit is an important part of tilting the odds in your favour.