Most Popular ETFs in Singapore For Portfolio Diversification
Low-cost structure, broad diversification, and liquidity are some of the reasons why Exchange Trade Funds continue to elicit strong interest, among investors, in Singapore. Being one of the largest economies in the Asia Pacific, the country also continues to experience a surge in ETFs designed to meet various investment strategies.
To those who don’t have an idea of what ETFs are, simply put, they are a basket of stock that try to imitate the movements of a particular market or index. For example, the Straits Times Index Fund tries to mimic the performance of the STI index. Should the STI index move up by 3.2%, it is common practice for the ETF to move up by say 3%.
What makes Exchange Traded Funds stand out in the stock market, compared to mutual funds, is that they don’t require real management to be able to generate returns. Most ETFs rely on a computer algorithm for the selection of stocks that mimic a particular index.
ETFs can also be bought and sold on the stock exchange, unlike mutual funds, which come with tight rules pertaining to when they can be bought and when one can exit a position.
Types of ETFs available In Singapore
Full Replication ETF
This type of ETF purchases all the stocks in an index in quantities according to the weightage. Any changes carried out on an index are also carried on the ETF to ensure it remains the same in terms of holdings and weight.
The main advantage of this type of ETF is that it is quite simple for investors to understand, as it is a representation of an entire index. The main drawback is that costs and tracking errors can be higher due to the constant changes inflicted in the ETF.
Partial Replication ETF
This type of ETF does not hold every stock in a given index. A good number of these types of ETFs hold only 30 of the most capitalized blue chip stocks of a given index. The main advantage of this type of fund is that it is cost effective as it does not incur the costs of having to buy and sell stocks to match a particular index.
The main drawback is that these types of ETFs do struggle, at times, to duplicate actual market movements.
In this case, investors pay money to a third party who uses the investments to buy stocks in whatever portfolio he wishes. When it comes to returns, investors are usually paid based on the result of an agreed index. The portfolio developed by the third party is normally used as collateral in case of a fund implodes.
Inverse ETFs pay the reverse of a given index when it comes to returns. For example, should the Straits Times Index falls 2%, investors, in this case, will walk away with returns of 1.9%
There are multiple types of Exchange-traded Funds in Singapore including, index ETFs, Stock ETFs Commodity ETF, and Bond ETF. Investors with these vehicles of investment get rewarded a great deal due to massive savings in management fees compared to things like mutual funds.
ETFs also provide an economic advantage in that they allow investors to invest in a wide array of industries thus diversifying their investment portfolios.
The only major drawback that ETF faces in market risk is that investors can buy units today and then have to contend with lower prices the next day. However, these investment vehicles have proved to be reliable when it comes to returns, in the long run.
Below are some of the top ETFs in Singapore
SPDR Strait Time Index ETF
SPDR Strait Time Index ETF provides investors with exposure to 30 of the top Singaporean blue chip stocks. The ETF holds stocks from some of the biggest companies in the telecommunications, oil & gas, and Financials, tech and consumer service sector. The fund tracks the Strait Times index.
If you are new to the world of ETF holding, this is a good fund to hold given its diversified portfolio. The ETF also provides an easy way of investing in companies that are consistently growing. The fact that the ETF consists of companies that are well known also makes it easy to track its performance.
Companies comprised in the ETF also do business outside the country something that goes a long way in taking once’ investments to new heights.
The fund size as of the end of February was S$669 million. Its 3 years annualized return stands at 9.17% and 5 years at 4.87%.
It also boasts of a 12-month yield of 2.87% and the ETFs pay dividends after every six months.
ABF Singapore Bond Index ETF
It is one of the largest ETFs in Singapore and was among the first ones in the game. Throughout the years, the fund has been growing steadily making it one of the most successful in terms of returns.
ABF Singapore Bond ETF is perfectly suited for income-focused investors, looking for fixed income, exposure and stability of returns. The fund tracks the Singapore bond market by trying to mimic the performance of iBoxx ABF Singapore Bond.
The majority of the index components are AAA- investments grade Singapore government bond, which allows investors to rest assure that their principal in highly secure. The fund size as of March 16, 2018, was about S$740 million.
The ETF boasts of 3 years and 5 years annualized returns of 6.02 and 1.74% respectively. Its 12-month yield currently stands at 2.33%. The fund pays dividends annually.
Philip SGX APAC Dividend Leaders REIT ETF
It is a unique type of exchange-traded fund as it provides investors with an opportunity to own a portfolio of Real Estate Investment Trusts, in the Asia Pacific Region. The fund strives to mimic the performance of the SGX Index Edge.
The ETF consists of the highest dividend yielding REITs across Singapore, Hong Kong and Australia. Its portfolio is made up of REIT counters such as Keppel REIT, Scentre Group, Link Real Estate Investment Trust and Mapletree Commercial Trust. The top 10 holdings in the ETF account for 68.93% of the total portfolio
Nikko AM Singapore STI ETF
Just like SPDR ETF, Nikko AM Singapore STI ETF tracks the Straits Time Index and tries to replicate its performance. However, the fund differs in that it only tracks the top ranking companies in Singapore.
Since the ETF is Singapore-based, it is suited for investors who are just getting started into the investment business. The fund allows one to invest only in the best blue-chip companies in the country.
The fund’ holdings consist of large companies in the field of telecommunications, real estate, financials, industrials and consumer staples. Its size as of March 16, 2018, was S$246.3 million and boasts of 3 years and 5 years annualized return of 8.6% and 4.92% respectively.
The ETF has a 12-month yield of 2.3% and pays dividends after every half year.
CIMB FTSE ASEAN 40 ETF
This exchange-traded fund strives to provide investors with exposure to 40 of the biggest blue-chip companies in five major countries across Southeast Asia. The fund is a one-stop shop for some of the biggest companies in Malaysia, Philippines, Singapore, Thailand, and Indonesia.
The ETF is perfectly suited to people who wish to diversify their investment portfolio with stocks of companies with high growth potential. Some of the companies in the portfolio include DBS Holdings Ltd and Oversea-Chinese Banking Corp from Singapore, PT Telekomunikasi Indonesia (Persero) from Indonesia, PTT PLC DR from Thailand and Public Bank BHD of Thailand.
The ETF size as of March 16, 2018, stood at $26.62 million, with a 3 year and 5 years annualized return of 8.81% and 4.35%. The fund boast a 12-month yield of 1.89% and pays dividends annually.
iShares MSCI India Index
Even though listed on Singapore stock exchange, the iShares MSCI India Index portfolio is mostly made up of stocks from Indian companies. Given that India is an economic powerhouse with a fast growing financial industry, the ETF provides an easy way of diversifying an investment portfolio.
The ETF’s provide investors in Singapore with exposure to mid-sized and large companies in India. The iShares portfolio is made up of a good mixture of industries and holdings in the computer, energy utilities, financial and telecommunication sector.
The ETF boasts of 3 years and 5 years annualized return of 5.44 and 8.31% respectively and a 12-month yield of 1.13%
SPDR S&P 500 ETF
SPDR S&P 500 is an Exchange Traded Fund that seeks to provide Singaporeans with exposure to the U.S stock market by purchasing stocks through the SGX. The fund consists of 500 stocks chosen across different sectors touching on areas of information & technology followed by financials, health care energy and real estate.
Contrary to perception, you don’t require a U.S trading account to own the ETF as it can be purchased from the SGX.
FTSE China 50 UCITS ETF
FTSE China 50 UCITS ETF provides a way of investing in large and growing Chinese companies while in Singapore. The exchange-traded fund also provides an easy way of gaining access to the Hong Kong stock market. The ETF tries to track the performance of the FTSE 50 H shares index.
Some of the stocks included in the ETF include Bank of China, Sinopec, and PetroChina. The fund had a market size of $173.69 million as of March 15, 2018. Its 3 years and 5 years annualized return currently stand at 10.70% and 10.34% respectively.
SPDR Gold Shares ETF
SPDR Gold Shares ETF strives to provide investors with exposure to the commodity business. Listed on the Singapore stock exchange, the ETF is one of the highest traded. Instead of buying and selling gold directly, the fund allows investors to play with Trust and gold bullion assets.
The ETF IS perfect for investors who have been in the stock exchange game for long and need to widen and differentiate their investments.
MSCI Indonesia Index UCITS ETF
MSCI Indonesia Index UCITS is an Exchange Traded Fund that tries to replicate the performance of the MSCI Daily Total Return Net Emerging Markets Indonesia USD index. Indonesia is one of the largest countries in the South East that continues to attract investors’ attention given its rising income and explosion of middle-class citizens.
The ETF is made up of 31 of the largest Indonesian companies’ thus providing investors a way of diversifying their portfolio with stakes in various sectors of the economy. Some of the largest holdings in the ETF include Bank Central Asia Tbk PT.
MSCI Korea UCITS Index ETF
A long time, Korean stocks have been viewed undervalued compared to other stocks in the region. MSCI Korea UCITS Index ETF thus provides an investment vehicle for stocks with great growth potential going forward.
The ETF tracks the MSCI Korea, which has 112 Korea multinationals and conglomerates. Some of the stocks in the ETF portfolio include Samsung Electronics and Hyundai. In addition, the fund provides investors with exposure to 85% of the Korean listed large cap and mid-cap stocks.
The fund boasts of 3 years and 5 years annualized return of 16.29% and 9.17% respectively with a 12-month yield of 0.11%. It pays dividends annually.
United SSE 50 China ETF
United SSE 50 China ETF targets investors who wish to diversify their investment portfolio with stakes in stocks in Asian banking, insurance, and securities world. The ETF is made up of stocks from 50 of the largest companies in the sector including the likes of Commercial Bank of China, CITIC Securities among other major powerhouses.
It mostly focuses on Chinese stocks being the largest economy in the region. The fund size as of the end of February stood at SGD37.67 million. It also has a 3 year and 5 years annualized return of 3.71% and 8.63% respectively.