Singapore ETF market outlook

SINGAPORE: Exchange Traded Funds (ETF) have been trading on the Singapore Exchange (SGX) for 10 years now but their popularity while on the uptick still lags behind other places like Hong Kong.

A dip in ETF turnover this year has left investors wondering where the Singapore ETF market is headed.

The first four months of the year haven’t been too friendly to Singapore’s ETFs.

While trading activity jumped on the SGX in January, both its volume and value have been on the steady decline ever since.

As of April, year-to-date total turnover was down 30 per cent.

Total year-to-date turnover was slightly more than S$1.71 billion in 2012. In April 2013, year-to-date total turnover was around S$1.2 billion.

David Kuo of The Motley Fool blames the drop on US Federal Reserve Chairman Ben Bernanke, who has been hinting towards an end to quantitative easing.

Mr Kuo said: “When Ben Bernanke starts to put less rum in the punch, it means the global economy is improving, that things are getting better and so therefore I think what we are seeing at this moment is a lull in investing in ETFs and until a time that people can see tangible reasons why the global economy is improving.

“If we start to see things like US unemployment coming down, US house prices going up or manufacturing improving in America, then people will say this is the next stage of the bull market and then they will start going into ETFs again.”

ETF trading hasn’t been huge in Singapore. ETF funds domicile in Singapore stand at about US$2.7 billion compared to US$26 billion to US$36 billion in Hong Kong, according to independent ETF consultancy ETFGI.

The firm said ETF listings in Hong Kong have almost doubled in the past three years from 40 to 76. In Singapore, there are a total of 30 ETF listings on the SGX.

Analysts said the divide has to do with Hong Kong’s links to China and Singaporean’s affinity to investing in more tangible investments like property and gold. 

Dividend-yielding stocks and REITs are also popular options.

However, Frank Henze of State Street Global Advisors said interest has picked up in the past two years as more people look to diversify their portfolios.

Henze, head of SPDR ETFs (Asia Pacific) at State Street Global Advisors, said: “This could be institutional clients, pension funds, private wealth or asset managers – simply because ETFs offer a utility that other funds don’t have. It offers transactability, liquidity, transparency.”

ETFs have long been hailed as the gateway to the stock market – easy to manage, relatively safe and some good returns.

Henze cited one Japanese ETF with 30 per cent returns but with all the options out there, it seems a cultural fondness for gold reigns supreme as it remains the most actively traded ETF in Singapore and Asia.

Singapore ETF market outlook