OREANDA-NEWS. Diversification is a popular investing term often associated with portfolio building. Investors that aim to reduce putting all their eggs in basket or reduce concentrating risk on one stock, sector, country or asset are seeking to diversify. Two of the most commonly taught ways to achieve portfolio diversification are firstly to spread the portfolio holdings over multiple asset classes such as equities, fixed income, real estate, cash and commodities and secondly spread the holdings so that the holdings on just one single country or economy.

Exchange Traded Funds (ETFs) can assist investors seeking to diversify as the majority of the world’s ETFs track indices, which are based on multiple constituents. Hence with just two ETFs, an investor can have exposure to the performance of multiple stocks that form an equity index, in addition to multiple bonds that make up a fixed income index.

During the first 10 trading sessions of April the most active ETFs by turnover spanned three asset classes – Gold, Equity Indices and Fixed Income. The Equity Indices were associated with the stock markets of Singapore, India, Indonesia, Brazil and China.

In addition, the db x-trackers Stoxx® Global Select Dividend 100 UCITS ETF which provides exposure to 100 of the highest-dividend-paying companies in the United States, Europe, and Asia Pacific also ranked amongst the 10 most active ETFs in the month thus far. Three fixed income ETFs that provide exposure to regional as well as local bond rates also ranked amongst the 10 most active ETFs of the month-to-date.

In the year thus far, these 10 ETFs have averaged a year-to-date total return of 5.1%. with 8 advancers and 2 decliners, and returns ranging from -8.2% to +35.2%. Of the 5.1% average return, 2.5% was added in April which saw nine of the 10 ETFs gain and one decline.

The 5.1% average return for the year-to-date compares to a 2.4% decline for the MSCI World Index and a 3.3% gain for the TR/SGX Singapore Fixed Income Index. The TR/SGX Singapore Fixed Income Index (SFI) tracks government, statutory board and corporate debt issuances in Singapore Dollars (SGD). Note these total returns are all in SGD terms.

Month-to-Date Active ETFs

The 10 most active ETFs on SGX in the month-to-date have been the SPDR® Gold Shares, SPDR® Straits Times Index ETF, iShares MSCI India Index ETF, iShares Barclays Capital USD Asia High Yield Bond Index ETF, db x-trackers MSCI Indonesia Index UCITS ETF, iShares J.P. Morgan USD Asia Credit Bond Index ETF, db x-trackers II Markit iBoxx ABF Singapore Government UCITS ETF, db x-trackers MSCI Brazil Index UCITS ETF (DR), db x-trackers Stoxx® Global Select Dividend 100 UCITS ETF and Lyxor ETF China Enterprise (HSCEI).

The equity indices accounted for most of the month-to-date turnover of the 10 most active ETFs as illustrated in the chart below.  The turnover of these 10 ETFS amounted to S$56 million over the ten sessions.  

MTD Turnover Distribution of 10 Most Active ETFs 

Source: SGX (Data as of 14 April 2016)

Performances of Month-to-Date Active ETFs

The three best performers in terms of month-to-date total returns were db x-trackers MSCI Brazil Index UCITS ETF (DR), Lyxor ETF China Enterprise (HSCEI) and iShares Barclays Capital USD Asia High Yield Bond Index ETF.

On April 17 [Sunday night Singapore time] the lower house of Brazil’s congress will vote on whether to proceed with impeachment of President Rousseff. Earlier this week Brazil’s retail sales for February were reported up 1.2% month-on-month, and down 4.2% year-on-year, following on from the January report declining 1.9%  month-on-month and declining 10.6% year-on-year. Brazil’s GDP declined 3.8% year-on-year in 2015.

While the Lyxor ETF China Enterprise (HSCEI) was the tenth most active ETF of the month thus far - of the 10, it was the second best performing ETF with a 4.4% return over the 10 sessions. The April-to-date gains of the Hang Seng China Enterprises Index (HSCEI) have trimmed its 2016 year-to-date decline to 8.1% in SGD terms.

Together, the 10 most active ETFs in April thus far have averaged a total return of 2.5%, which as noted above have taken their average year-to-date returns to 5.1 %. The 10 most active ETFs in the April 2016 month-to-date are detailed below in SGD.

Name Stock Code Total Return MTD % Total Return YTD % Total Return 12M % 30 Day Volatility %
SPDR® Gold Shares O87 1.7 12.2 4.1 18.8
SPDR® Straits Times Index ETF ES3 1.7 0.2 -14.7 17.9
iShares MSCI India Index ETF I98 2.0 -3.1 -16.3 15.9
iShares Barclays Capital USD Asia High Yield Bond Index ETF O9P 2.8 1.1 4.8 6.7
db x-trackers MSCI Indonesia Index UCITS ETF KJ7 0.6 7.2 -11.8 18.3
iShares J.P. Morgan USD Asia Credit Bond Index ETF N6M 2.6 1.3 3.9 11.1
db x-trackers II Markit iBoxx ABF Singapore Government UCITS ETF KV4 -0.8 4.0 2.8 4.7
db x-trackers MSCI Brazil Index UCITS ETF (DR) J0O 7.8 35.2 -15.4 55.6
db x-trackers Stoxx® Global Select Dividend 100 UCITS ETF KT3 2.6 1.2 -2.4 14.9
Lyxor ETF  China Enterprise (HSCEI) P58 4.4 -8.2 -34.8 27.8
Average   2.5 5.1 -8.0 19.2

Source: SGX (data as of 14 April 2016), Please notes returns are denominated in SGD.

The above-mentioned 10 ETFs saw a 0.6% YoY decrease in turnover for the month thus far, declining from S$56.3 million in the April 2015 month-to-date to S$56.0 million in the same period this year. This brings their total 12-month turnover to S$1.8 billion. Turnover comparisons are tabled below.

Name Stock Code MTD Turnover 2016 (S$) MTD Turnover 2015 (S$) YTD Turnover 2016 (S$)
SPDR® Gold Shares O87 17,997,599 10,985,870 219,860,861
SPDR® Straits Times Index ETF ES3 10,067,405 4,525,104 126,542,710
iShares MSCI India Index ETF I98 7,281,111 26,120,614 133,499,900
iShares Barclays Capital USD Asia High Yield Bond Index ETF O9P 5,444,145 1,647,920 33,089,446
db x-trackers MSCI Indonesia Index UCITS ETF KJ7 3,622,490 3,664,636 28,661,880
iShares J.P. Morgan USD Asia Credit Bond Index ETF N6M 3,437,456 1,743,247 28,112,182
db x-trackers II Markit iBoxx ABF Singapore Government UCITS ETF KV4 2,672,342 130,544 2,685,618
db x-trackers MSCI Brazil Index UCITS ETF (DR) J0O 2,540,719 529,193 11,432,558
db x-trackers Stoxx® Global Select Dividend 100 UCITS ETF KT3 1,509,541 25,888 2,074,168
Lyxor ETF  China Enterprise (HSCEI) P58 1,396,904 6,944,168 8,640,023

Source: SGX (data as of 14 April 2016)