Money Flowing Into Singapore ETFs

Singapore ETFs are receiving increased inflows after nearly a year of disinterest by money managers and investors.

Fueled mostly by increased political stability and low valuations, Singapore is becoming one of the most attractive investment opportunities in Asia.

Singapore’s strategic location in Southeast Asia has made it a hub for business in that region of the world. 

Jonathan Garner, Hong Kong-based head of Asia and emerging-market strategy at Morgan Stanley, had this to say about the outlook of Singapore’s economy: “The Singapore market is somewhat undervalued for a pretty strong growth environment with positive earnings revisions.”

There are two ETFs whose holdings are completely comprised of publicly traded companies in Singapore and will likely be affected by increased interest in the country’s stock market.

The iShares MSCI Singapore ETF EWS provides exposure to 31 large- and mid-sized companies in Singapore. EWS has a fairly consolidated portfolio with its top four holdings making up 46 percent of the entire fund and three of the four being banks. The top holding is DBS Group Holding Inc with a 12.5 percent allocation, Singapore Telecommunications Inc at 12.4 percent, United Overseas Bank Ltd. 11.2 percent and Oversea Chinese Banking Corp. Ltd. at 10.1 percent.

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EWS has lagged the broader world markets with a gain of 11.4 percent over the last 12 months, and is up 10.9 percent the last six months. With banks making the up largest part of the portfolio, the ETF will be relying on the overall economy in the country. From a technical perspective, a close above resistance at the $14.25 area would be a buy signal.

The iShares MSCI Singapore Small Cap index ETF EWSS provides investors with exposure to small public companies in Singapore. It Follows 86 securities and is much more diverse than EWS.

The top three holdings include Suntec Interest Trust at 6.7 percent, Singapore Post Ltd at four percent, and Ezion Holdings Ltd with a 3.6 percent holding. EWSS is virtually unchanged over the last 12 months but has been performing better as of late up 9.7 percent over the last six months. The 5.2 percent dividend yield could sway investors that are seeking out high income.

Strategic location and relative ease of doing business puts the emerging Southeast Asia City-State in a good spot going forward. The two ETFs could be an interesting alternative to popular emerging markets in the area such as China and India.