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4 Stocks This Week (ETFs) [4 Jun 2017]: Straits Times Index; ABF Singapore Bond Index Fund; S&P 500; Gold Shares

This week, we look at some ETFs listed on the Singapore Exchange. Investors can use them as a way to diversify their portfolios and even decide on their portfolio allocation.

Market Sentiments

Strong economic and jobs data from US has also buoyed global markets with the London’s FTSE 100 rising to another record high at 7,547.63 points, delivering 26.4% in the last 52 weeks, and US’ S&P 500 rising to 2,439.07 points, delivering 18.7% returns in the past 52 weeks.

The only negative came from the tumble in oil following US’ withdrawal from the Paris climate agreement.

The generally positive sentiment spilled over into Singapore. Showing signs of positive investor confidence, three enbloc deals were sealed – Eunosville, Rio Casa in Hougang; and the Goh & Goh building next to Beauty World MRT station.

The local Straits Times Index (STI) also rose during the week, ending at 3240.01 points. The STI has delivered 19.6% in the past 52 weeks. On the back of this, there were also several IPO related news in the market – with SingTel’s Netlink Trust receiving SGX’s conditional approval to list its fibre broadband network. Hong Kong’s Tongfang Kontafarma also acquired a significant stake in local fitness and wellness provider True Group for US$36.7 million. It too has plans to list the company; this is likely to be in Hong Kong or they may consider Singapore.

However, Noble Group continued to slip both in terms of share price and confidence. German shipping group, Rickmers, also added to the woes by filing for insolvency.

Exchange Traded Funds (ETFs)

Exchange traded funds (ETFs) are funds that seek to replicate the returns of the index it is tracking.

In Singapore, there are about 70 listed ETFs that investors can choose to put their money into. As mentioned, this can come in the form of a wide variety of individual companies listed globally or regionally; country-specific; sector-specific; or asset class-specific such as bonds, gold or commodities.

Also Read: How Does ETFs Investing Really Work In Singapore

The Singapore Exchange (SGX) released a note stating that for the month of May, the five most actively traded ETFs have delivered a total return of 11.5% since the start of this year. These ETFs include the iShares MSCI India Index ETF; SPDR Gold Shares ETF, SPDR Straits Times Index; db x-trackers MSCI Indonesia Index Ucits ETF; and db x-trackers MSCI China Index UCITS ETF (DR).

As its name suggests, the providers of the ETFs are iShares, SPDR and db x-trackers respectively. And the index it is tracking is also clearly stated in its name.

This year, the SGX welcomed two bond listings. On 5 April 2017, One STOXX ASEAN Select Dividend ETF; and on 29 March 2017, NikkoAM-Straits Trading Asia Ex Japan REIT ETF, listed on the exchange.

Also Read: 4 stocks this week [3 Apr 2017]: One STOXX ASEAN; NikkoAM-StraitsTrading; Samurai 2K; UnUsUal

The former includes 30 of South East Asia’s highest dividend-paying stocks, while the latter is a REITs ETF concentrated on properties in Singapore, Hong Kong and the rest of Asia, excluding Japan.

SPDR Straits Times Index ETF (SGX: ES3)

The SPDR Straits Times Index ETF was the third most actively traded ETF in May. The ETF is one of two that tracks the local Straits Times Index (STI), with the other one being the Nikko AM Singapore STI ETF.

By tracking the STI, the ETF gives investors exposure to the top 30 stocks in Singapore. Being country-specific and including the top 30 listed companies in Singapore, investors have a proxy to invest in the Singapore economy, which saw real GDP increase 2.7% year-on year in the 1st quarter of 2017.

SPDR and Nikko AM merely replicates the index that is calculated by FTSE International Limited, which does this in conjunction with SPH Data Services and data from Singapore Exchange.

Also Read: Why Average Singaporeans Should Buy The STI ETF As Their First Stock

In the past week, the SPDR STI ETF rose marginally, to 3.28 points from 3.27 points. In the past 52 weeks, though, it has seen a strong rise of 18.8%.

ABF Singapore Bond Index Fund (SGX: A35)

The ABF Singapore Bond Index Fund is managed by Nikko AM, and allows you to invest into primarily AAA-rated Singapore government bonds and quasi-Singapore government entities such as PSA, HDB (Housing & Development Board), Land Transport Authority and Temasek Financial I. This ETF tracks the iBoxx ABF Singapore Bond Index.

Also Read: Bond Investments (Aside From The SSB) For The Average Singaporean To Consider

This ETF allows investors to diversify their investments into bonds as an asset class while still enjoying high liquidity and low transaction and management costs. Tracking some of the safest bonds in the world, it is entirely expected that returns will be relatively lower when compared to other bonds or asset classes.

Highlighting that it is a lower risk investment, its share price remained stable in the past week at 1.161 points. In the past 52 weeks, it has returned close to 2.0%.

SPDR S&P 500 ETF (SGX: S27)

ETF providers often offer a wide variety of ETFs to investors. In this case, SPDR also offers investors access to the US market via its S&P 500 ETF, which tracks 500 of the largest capitalised companies in the US.

Positive sentiments, backed by economic and labour data, in the US has driven up share markets and investor confidence. Through this ETF, investors in Singapore are able to diversify their investments into US markets while still using their local brokers. However, you should note that this ETF only allows investments in US dollars.

Also Read: How Singaporeans Can Start Investing In The US, Hong Kong Or Other Major Overseas Stock Markets

In the past week, the S&P 500 ETF has risen to new record levels at 244.17 points or just over 1.0%. In the past 52 weeks, it has shown strong returns of 18.2%.

SPDR Gold Shares ETF (SGX: O87)

In May, the SPDR Gold Shares ETF was the second highest traded ETF, with the first being the iShares MSCI India Index ETF. The SPDR Gold Shares ETF allows investors to portion part of their portfolio into gold, a whole different asset class, while still using their local brokerage to make the transaction.

Gold has always been seen to be a good store of value, especially to hedge asset values in times of geopolitical uncertainties and recession. While this is counterintuitive to the positive market sentiments, there may be contrarians who could point to an impending drawback in markets (which happens every decade or so, but hasn’t happened since 2008) or those who want to lock in profits by selling equities and buying a safe asset class.

Still, there also remains certain unpredictability with Donald Trump’s presidency, the European politics and risks in Asia with North Korea’s and China’s stances.

Also Read: What You Don’t Know About Gold Investing May Hurt You

Tracking the LBMA Gold Price PM prices, a reputable index for gold price, allows investors in Singapore to find an optimal portfolio allocation for themselves. Similar to the SPDR S&P 500 ETF, investors have to note that these global investments are usually traded in US Dollars.

In the past week, gold prices came down marginally to 119.86 points. Looking at the past 52 weeks, it has approximately 3.3%.

Read Also: 4 Stocks This Week (Healthcare) [22 May 2017]: Raffles Medical Group, Singapore O&G, Singapore Medical Group and First Reit

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4 Stocks This Week is not a recommendation from us to buy or sell any of these stocks. For investors who are keen to find out more, you should continue researching about them before making your investment decisions.