OREANDA-NEWS. Fed officials were worried about the potential drag from China’s slowdown and global financial market volatility, which have increased uncertainty and downside risks for the US economy, minutes from January’s Federal Open Market Committee (FOMC) meeting showed.

This could lead to a slower pace of US interest rate hikes this year. The Fed, which raised rates for the first time in almost a decade in December, had projected an additional four quarter-percentage-point increases in 2016. It kept the target range for its benchmark fed funds rate at 0.25% to 0.5% at its 26-27 January meeting.

Officials at their 15-16 March policy setting meeting will submit fresh quarterly forecasts for the US economy and their estimates of the appropriate pace of rate hikes over the coming years.

The January minutes, released on Wednesday in Washington, indicated concern that structural changes and financial imbalances in the Chinese economy might result in a sharper-than-expected deceleration in growth. This could impact emerging markets and the economies of key US trading partners like Canada and Mexico.

Fed officials added they would closely monitor developments in the global economy and financial markets, as well as oil prices.

Separately, Federal Bank of St Louis President James Bullard said in a speech on Wednesday that recent financial market turbulence and a further decline in investors’ expectations for inflation have given the central bank leeway to delay rate hikes.

In her congressional testimony last week, Fed Chair Janet Yellen suggested the central bank may delay, but not abandon, planned interest rate increases this year.

Excerpts from FOMC Minutes

“Although most participants continued to expect that inflation would rise to the Committee’s 2 percent objective over the medium term, a number of participants indicated that, in light of recent developments, they viewed the outlook for inflation as somewhat more uncertain or saw the risks as being to the downside.”

“Participants discussed recent developments in China, including the possibility that structural changes and financial imbalances in the Chinese economy might lead to a sharper deceleration in economic growth in that country than was generally anticipated. Such a downshift, if it occurred, could increase the economic and financial stresses on other EMEs and on commodity producers, including Canada and Mexico. Moreover, global financial markets could continue to be affected by uncertainty about China’s exchange rate regime. While the exposure of the United States to the Chinese economy through direct trade ties was limited, a number of participants were concerned about the potential drag on the U.S. economy from the broader effects of a greater-than-expected slowdown in China and other EMEs.”

“Participants judged that the overall implication of these developments for the outlook for domestic economic activity was unclear, but they agreed that uncertainty had increased, and many saw these developments as increasing the downside risks to the outlook.”

US Economic Data

Meanwhile, growth momentum in the US economy appears to be picking up. Manufacturing output rose in January by the most since July 2015, signalling that the industry is stabilising. Factory output rose a better-than-expected 0.5% last month, after a 0.2% decline in December.

Weekly jobless claims also fell to a three-month low, underscoring the resilience of the domestic labour market. Initial jobless claims dropped by 7,000 to 262,000 in the week ended 13 February, lowest since 21 November, a Labor Department report showed on Thursday.

US ETFs on SGX

SGX lists nine ETFs with U.S. equity exposure – SPDR® Dow Jones Industrial Average ETF, db x-trackers S&P 500 Inverse Daily UCITS ETF, db x-trackers S&P 500 UCITS ETF, Lyxor ETF Nasdaq-100, Lyxor ETF Dow Jones Industrial Average, SPDRs® S&P 500® ETF, iShares Core S&P 500 ETF, db x-trackers MSCI USA Index UCITS ETF and iShares Dow Jones US Technology Sector Index ETF.

These nine ETFs have averaged total returns of negative 0.9% in the month-to-date and negative 2.2% over the past 12 months.

Name Stock Code Price (S$) MTD Turnover 2016 (S$) MTD Turnover 2015 (S$) 12M Turnover (S$) Total Return MTD % Total Return 12M %
SPDR® Dow Jones Industrial Average ETF D07 164.56 1,110,333 585,348 13,767,410 0.2 -4.2
db x-trackers S&P 500 Inverse Daily UCITS ETF HD6 22.55 967,273 267,011 15,780,758 -2.6 6.5
db x-trackers S&P 500 UCITS ETF K6K 32.94 281,841 359,040 7,547,466 -0.6 -4.1
Lyxor ETF Nasdaq-100 H1Q 16.59 87,104 9,286 3,365,270 -1.4 -1.0
Lyxor ETF Dow Jones Industrial Average JC6 16.55 73,582 34,270 856,963 0.3 -4.6
SPDRs® S&P 500® ETF S27 192.51 32,225 254,108 9,174,090 -0.2 -4.1
iShares Core S&P 500 ETF I17 186 13,245 99,950 2,759,412 -1.6 -4.6
db x-trackers MSCI USA Index UCITS ETF KF8 49.1 3,278 1,733,736 11,985,569 -0.6 -5.3
iShares Dow Jones US Technology Sector Index ETF I21 99.4 0 20,641 29,775 -1.6 1.9
Average           -0.9 -2.2

Source: SGX (data as of 18 February 2016)

Month-to-Date Performances

The 10 most active ETFs on SGX in the month-to-date are SPDR® Gold Shares, SPDR® Straits Times Index ETF, iShares MSCI India Index ETF, db x-trackers MSCI China Index UCITS ETF (DR), db x-trackers FTSE China 50 UCITS ETF (DR), db x-trackers MSCI Thailand Index UCITS ETF (DR), db x-trackers MSCI Indonesia Index UCITS ETF, Nikko AM Singapore STI ETF, db x-trackers MSCI Korea UCITS Index ETF (DR) and db x-trackers MSCI Russia Capped Index UCITS ETF.

In the month thus far, these 10 most active ETFs averaged a 0.5% decline in total return, taking the one-year and three-year annualised total returns to -17.1 % and -3.2% respectively. The three best performers in terms of month-to-date total returns were SPDR® Gold Shares, db x-trackers MSCI Indonesia Index UCITS ETF and Nikko AM Singapore STI ETF.

The above-mentioned ETFs saw a 81% YoY increase in turnover for the month thus far, rising from S$75.3 million in the February 2015 month-to-date to S$136.2 million in the same period this year. This brings the total 12-month turnover to S$1.9 billion.

The three most active ETFs over the first 12 sessions of February were SPDR® Gold Shares, SPDR® Straits Times Index ETF and iShares MSCI India Index ETF.

The 10 most active ETFs in the February 2016 month-to-date are detailed below and sorted by MTD turnover.

Name Stock Code Price (S$) MTD Turnover 2016 (S$) MTD Turnover 2015 (S$) YTD Turnover 2016 (S$) 12M Turnover (S$)
SPDR® Gold Shares O87 115.44 71,226,114 13,163,763 110,916,834 507,099,424
SPDR® Straits Times Index ETF ES3 2.66 20,180,873 4,890,868 84,750,223 467,939,594
iShares MSCI India Index ETF I98 6.00 14,661,707 39,550,085 64,684,660 541,446,131
db x-trackers MSCI China Index UCITS ETF (DR) LG9 10.74 7,666,099 9,103,548 13,799,753 88,298,611
db x-trackers FTSE China 50 UCITS ETF (DR) HD8 25.42 6,075,522 1,084,732 11,104,840 91,086,927
db x-trackers MSCI Thailand Index UCITS ETF (DR) LG7 16.09 4,248,850 1,437,200 9,704,699 41,669,713
db x-trackers MSCI Indonesia Index UCITS ETF KJ7 12.53 4,061,453 3,173,032 8,427,635 74,742,392
Nikko AM Singapore STI ETF G3B 2.73 3,588,762 1,948,632 10,085,974 65,828,911
db x-trackers MSCI Korea UCITS Index ETF (DR) IH2 47.68 2,473,745 36,355 3,716,149 20,080,326
db x-trackers MSCI Russia Capped Index UCITS ETF J0R 1.60 1,981,755 931,433 7,809,701 37,862,577

Source: SGX (data as of 18 February 2016)

Name Stock Code Total Return MTD % Total Return YTD % Total Return 12M % Total Return Annualized 3 Yrs  % Total Return 3 Yrs  % 30 Day Volatility %
SPDR® Gold Shares O87 6.8 12.4 2.6 -5.8 -16.4 16.9
SPDR® Straits Times Index ETF ES3 1.1 -8.4 -20.0 -4.2 -12.1 24.0
iShares MSCI India Index ETF I98 -7.7 -11.4 -22.9 2.6 7.9 26.7
db x-trackers MSCI China Index UCITS ETF (DR) LG9 -2.3 -14.7 -21.9 -1.2 -3.4 35.4
db x-trackers FTSE China 50 UCITS ETF (DR) HD8 -2.7 -14.5 -24.8 -1.8 -5.4 39.3
db x-trackers MSCI Thailand Index UCITS ETF (DR) LG7 0.0 0.2 -21.8 -6.6 -18.5 28.1
db x-trackers MSCI Indonesia Index UCITS ETF KJ7 4.5 7.5 -12.1 -4.3 -12.3 23.8
Nikko AM Singapore STI ETF G3B 1.9 -7.6 -19.2 -4.0 -11.5 26.7
db x-trackers MSCI Korea UCITS Index ETF (DR) IH2 -2.9 -7.7 -13.2 -3.8 -11.0 26.2
db x-trackers MSCI Russia Capped Index UCITS ETF J0R -4.0 -4.1 -18.0 N/A N/A 57.9
Average   -0.5 -4.8 -17.1 -3.2 -9.2 30.5

Source: SGX (data as of 18 February 2016)

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, including local stocks, international securities, bonds, commodities or money markets.

Each ETF gives investors access to the performance of the asset that comprises the underlying index. Investing in the ETF is also less costly if one was to build a similar portfolio by buying the individual stocks. It also provides exposure to international markets and asset classes that may be inaccessible to individual investors.