- POSTED: 20 Jan 2014 20:13
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Going forward, some financial analysts expect the local exchange-traded funds market to expand as investors shift their asset allocation to favour equities over bonds.
SINGAPORE: Singapore investors are moving away from gold exchange-traded funds (ETFs) to placing their bets on ETFs that track equity indices.
Going forward, some financial analysts expect the local ETF market to expand as investors shift their asset allocation to favour equities over bonds.
Gold-tracking ETF, SPDR Gold Shares, saw the highest turnover of S$1 billion among all Singapore Exchange (SGX) listed ETFs last year.
It accounted for some 33 per cent of the total turnover in 2013.
However, this is down from 45 per cent in 2012 as gold prices plunged some 28 per cent in 2013.
And among the 10 most active ETFs by turnover, it saw the biggest decline in net asset value of some 28 per cent.
Instead, investors are shifting towards ETFs tracking equity indices in search of more attractive returns.
The iShares MSCI India Index ETF and two China ETFs -- DBXT CSI 300 UCITS ETF and Lyxor ETF China Enterprise (HSCEI) -- account for almost 30 per cent of total turnover.
Meanwhile, the best performing of the 10 most active ETFs was FTSE Vietnam UCITS ETF. Its net asset value gained 13.6 per cent in 2013.
Geoff Howie, director of market strategy sales and clients at SGX, said: "Blackrock just released last week its ETF landscape report for 2013. (The report) showed the third most popular type of ETF was that focused on dividends and that appetite for dividends did play out somewhat in our most active ETFs in 2013.
"The ETFs that saw growths are the Straits Times Index (STI) ETFs - SPDR Straits Times Index ETF and Nikko AM Singapore STI ETF, and these ETFs track the STI and both distributed dividends in the year of 2013."
The two ETFs tracking the STI made up 7.3 per cent of the 2013 turnover, up from 4.4 per cent in 2012.
Currently, the majority of the 89 ETFs listed on the SGX track the performance of equity indices as compared to a wider range of ETFs tracking specific sectors and commodities in more developed markets.
Financial advisers said the limited diversity may dampen interest in ETFs in Singapore.
But looking ahead, some expect a greater flow of funds into this market.
"As you have a shift of assets out of bond assets into stock assets, we'll gradually see an increase in liquidity in the ETF space," said Brian Tan, associate director of private wealth management at Financial Alliance.
He added: "(This is) mainly because as institutional managers shift their asset allocations, we'll get a flow of funds into ETFs to take on broad market exposure first before they do their groundwork and gradually shift that market exposure into individual stocks. We think in the long run, that's still positive for the ETF market in Singapore."
Meanwhile, with an increasing number of global asset managers based in Singapore and liquidity expected to improve, higher trading activity may encourage the issuance of more differentiated ETFs.