OREANDA-NEWS. Exchange Traded Funds (ETFs) are open-ended investment funds but are listed on and traded on an exchange. ETFs aim to track the performance of an index and provide access to a wide variety of markets and asset classes. The ETFs that track equity indices provide investors with the diversified and benchmarking benefits of that index in the form of a single security. Hence in one single security product, investors can have access to the moves and dividends of the Straits Times Index (STI).

The STI is regarded as the benchmark index for the Singapore stock market and is made up of 30 constituents that represent more than half of the total market capitalisation of all primary and secondary stocks listed on the Singapore Exchange (SGX).

In the year thus far, the STI has gained 5.1% in price, with dividend distribution boosting that return to 8.4%. There are two ETFs listed on SGX which track the performance of the STI. They are the Nikko AM Singapore STI ETF and the SPDR® STI ETF.

The net asset value (NAV) of the Nikko AM Singapore STI ETF as of 22 December 2014 stood at S\\$3.43 while the NAV of the SPDR® STI ETF stood at S\\$3.37. The SPDR® STI ETF last went ex-dividend on 7 August 2014, distributing S\\$0.045 per unit, bringing the total dividend distribution per unit in the year thus far to S\\$0.086. Nikko AM Singapore STI ETF last went ex-dividend on 1 July 2014, distributing S\\$0.0465 per unit. On 15 December 2014, Nikko Asset Management Asia Limited, manager of the Nikko AM Singapore STI ETF announced a dividend distribution of S\\$0.0495 per unit, which goes ex-dividend on 6 January 2015.

Although SPDR® STI ETF and Nikko AM Singapore STI ETF both use the STI as the benchmark in the fund, the key difference is the difference in each lot size traded. The lot size of SPDR® STI ETF is 1000 shares while the lot size of Nikko AM Singapore STI ETF is 100.

EIP Classification

The Monetary Authority of Singapore (MAS) in early 2012 introduced new rules requiring retail investors to complete Customer Assessment Reviews (CARs) with their financial intermediaries before investing in products classified as Specified Investment Products (SIPs).

MAS later allowed certain products, notably ETFs that met certain criteria, to be exempt from the SIP classification and be reclassified as Excluded Investment Products (EIPs). Thus, like ordinary stocks, EIPs can be bought and sold by retail investors without needing to complete a CAR. Both the Nikko AM Singapore STI ETF and SPDR® STI ETF are now categorised as EIPs.