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Investments in Singapore Property Assets Rise: ETF in Focus

Zacks Equity Research

Singapore is seeing a surge in investments in property assets. Foreign investments in the country’s property assets rose to $4.1 billion in 2016, an increase of 441% year on year.  The major component of this investment was the Qatar Investment Authority's purchase of Asia Square Tower 1 for $2.45 billion.


Per the URA price index, office prices declined 0.6% sequentially in Q4 2016. It declined 2.8% in the full year compared with a 0.1% decline a year ago. These factors make the space an attractive bet.


The economy seems to be in good shape. A March 2017 survey conducted by the Monetary Authority of Singapore (MAS) shows that economists project growth of 2.6% for the first three months of 2017 and 2.3% for the whole year. The favorable projections can be attributed to strong growth in the final quarter of 2016 and also in the full year. The economy grew 2.9% in Q4 2016 and 2% in the whole year.


Moreover, the quarterly Business Optimism Index for the second quarter rose to 2.66% from -1.22% in the first quarter based on a survey by Singapore Commercial Credit Bureau (SCCB). Singapore seems to be recovering steadily from the setback it faced last year in terms of GDP contraction.


We will now discuss about the Singapore ETF in detail.


IShares MSCI Singapore Capped ETF EWS


This fund focuses on Singapore equities and is the most popular option to gain exposure to the economy.


The fund has AUM of $528.5 million and charges 49 basis points in fees per year. Financials, Real Estate, and Industrials are the top three sectors with 36.1%, 19.8%, and 18.8% allocation, respectively. It trades in an average volume of 583,000 shares. The fund returned 3.92% in the past one year and 14.3% in the year-to-date time frame (as of March 28, 2017). This speaks volumes about the confidence boost in the economy so far this year. EWS currently has a Zacks ETF Rank 3 (Hold) with a Low risk outlook.


We will now compare the performance of EWS to a broader South East Asian ETF, ASEA.


Global X Southeast Asia ETF ASEA


This fund provides broad exposure to the five members of the Association of Southeast Asian Nations, Singapore, Indonesia, Malaysia, Thailand, and the Philippines. It is appropriate for investors looking for a diversified exposure to South East Asia (read: Indonesian Stocks Rally: ETFs in Focus).


ASEA is less popular with an AUM of $11.35 million and charges a fee of 65 basis points a year. Financials, Telecom, and Industrials are the top three sectors of the fund and comprise almost 70% of the fund’s holdings. It bears concentration risk as almost 50% is allocated to the top 10 holdings. It trades in an average volume of 3930 shares. The fund gained 5.11% in the past one year and 10.95% in the year-to-date time frame (as of March 28, 2017). ASEA currently has a Zacks Rank #3 (Hold) with a Medium risk outlook (read: Malaysia Inflation at Record High: ETF in Focus).

 
Source: Yahoo Finance


Bottom Line


Though ASEA has outperformed the Singapore ETF by almost 1.2% in the past one year, the recent boost in confidence in the Singapore economy contributed to the positive performance of EWS in the year-to-date timeframe, as evident from the YTD chart. Investors looking to gain exposure to this economy can consider EWS. However, owing to President Trump’s protectionist agenda, the impact of his stance on trade in this export-reliant economy is still quite uncertain. Therefore, we believe it’s prudent to remain on the sidelines for now (read: Why Investors are Bailing Out of US Stock ETFs).


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ISHRS-MS SNGPRE (EWS): ETF Research Reports
 
GLBL-X SE ASIA (ASEA): ETF Research Reports
 
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