OREANDA-NEWS. Exchange Traded Funds (ETFs) are investment funds listed and traded intraday on a stock exchange. The majority aim to track the performance of an index and provide access to a wide variety of markets and asset classes such as local stocks, international stocks, bonds, commodities or money markets.

One single ETF gives the investor access to the performance of the stocks, bonds  that comprise its underlying index. Investing in the ETF is also less costly if you were to build a similar portfolio by buying the individual stocks. Furthermore, it gives access and exposure to international markets and other asset classes which may be inaccessible to individual investors.

Total turnover of ETFs listed for trading on Singapore Exchange (SGX) is up 37% from the first seven months of last year. The year to date’s 10 most active ETFs by turnover have averaged a 0.6% decline, which has trimmed their average three year total returns to 21.4%.

During the month of July, eight of the 10 ETFs saw an increase in their volatility, with the China-tracking ETFs and commodity ETFs leading price declines. Of the eight ETFs, the iShares MSCI India Index ETF saw an increase in volatility as well as a price gain of 1.2%. This ETF accounted for 18.7% of ETF turnover in July, similar to its share of turnover in the first seven months of 2015 at 18.8%.

Yesterday an institutional transaction on ABF Singapore Bond Index ETF meant this ETF was the most active ETF by turnover for the session. Meanwhile the most active ETF tracking fixed income indices over the first seven months of 2015 was the iShares Barclays Capital USD Asia High Yield Bond Index ETF. This was the seventh most active ETF throughout the course of the first seven months of the year, gaining 1.6% in the price for the year thus far while maintaining a 5.6% dividend yield. The ETF distributes dividends on a quarterly basis, distributing US$0.15 per unit in June and US$0.18 per unit in March.

The list of the ten most active ETFs in the first seven months of 2015 are detailed below.

Most Active ETFs by turnover in Jan – Jul 2015 % Total of Turnover Jan-Jul 2015 SGX Code 30D Vol 260D Vol Px Chg July Px Chg YTD

Total Return:

Y-3

 Div Yield %
ISHARES MSCI INDIA INDEX ETF* 18.8% I98 28.7 20.3 1.2 4.8 40.9 N/A
SPDR® GOLD SHARES 15.5% O87 14.6 14.3 -8.1 -9.9 -32.8 N/A
SPDR® STRAITS TIMES ETF 14.4% ES3 14.0 10.4 -3.3 -5.6 13.5 3.0
DBXT MSCI AC ASIA EX JAPAN INDEX UCITS ETF 6.2% IH1 21.7 18.6 -6.6 -4.4 13.7 N/A
DBXT CSI 300 UCITS ETF 4.3% KT4 65.6 36.6 -14.2 8.1 54.1 1.1
UNITED SSE 50 CHINA ETF 4.0% JK8 49.8 35.2 -12.6 14.3 61.0 N/A
ISHARES BARCLAYS CAPITAL USD ASIA HIGH YIELD BOND INDEX ETF* 3.7% O9P 5.9 6.9 -0.3 1.6 20.5 5.6
DBXT FTSE CHINA 50 UCITS ETF 3.0% HD8 37.9 24.3 -12.5 -1.7 26.9 N/A
DBXT MSCI CHINA INDEX UCITS ETF 3.0% LG9 37.9 22.6 -11.1 1.4 30.9 N/A
DBXT MSCI INDONESIA INDEX UCITS ETF 2.6% KJ7 17.6 17.7 -4.4 -15 -15.1 N/A
Average     29.4 20.7 -7.2 -0.6 21.4  

Source: SGX (data as of 5 August 2015) * please note dual currency traded ETF. Turnover and no. of trades is the total of the USD and SGD counters.

EIP ETFs

Six of the above tabled 10 ETFs are classified as non-Specified Investment Products (SIPs), otherwise referred to as Excluded Investment Products (EIPs). These are the iShares MSCI India Index ETF, SPDR® Gold Shares, SPDR® Straits Times ETF, iShares Barclays Capital USD Asia High Yield Bond Index ETF, db x-trackers FTSE China 50 UCITS ETF and the db x-trackers MSCI China Index UCITS ETF.

An EIP ETF generally invests in a basket of stocks that make up the index it is designed to track, rather than a derivative product that derives its value from the index. EIPs can be bought and sold by individual investors without having to complete a Customer Assessment Review, or take the online SIP test. Last month a batch of 10 ETFs gained EIP status. There are a total of 19 ETFs listed on the SGX are now classified as EIPs.

Just like the indices they track, the biggest risk ETF investors face is market risk; that is, investors can buy units today and be faced with a lower unit price tomorrow. There are other risks associated with ETFs that are unique to the type of ETF. The rule of thumb is that if the ETF is an EIP, it implies the ETF is less complex and there are fewer unique risks than those involving an ETF categorised as an SIP.