There were 81 Exchange-Traded Funds (ETFs) available in Southeast Asia markets with market capitalization of USD 2.5 billion, which was 0.1% of total ASEAN exchanges market capitalization of USD 1.95 trillion (as of 4th April 2016). ETF is listed on stock exchange which investors are able to trade them like individual stocks. There are plenty of advantages for investing in ETF over mutual funds:
- No sales charge or application fee
- Passive investment of tracking index performance
- Exposure and diversification of markets and asset classes
- Lower overall cost
- Flexibility and liquidity through intraday trading
Which ASEAN exchange has the largest amount of ETF?
Unsurprisingly Singapore topped the ETF league table in Southeast Asia for having biggest ETF market capitalization of USD 1.8 billion and 41 ETFs. Outside Singapore, Malaysia championed in market capitalization (USD 444 million from 8 ETF) while Thailand championed in number of ETFs (20 ETFs with USD 136 million market capitalization).
|Exchange||Number of ETF||Total ETF Market Cap (USD mil)|
Who are the biggest ETF providers in Southeast Asia?
Top 10 largest ETF providers handle more than 85% of global ETF assets, but not all of them are presence on the ASEAN exchanges probably due to the size of the markets are too small. However global players such as Blackrock and Deutsche are no stranger to the ETF markets in the region.
Top 5 ETF providers by number of ETFs:
- Deutsche Asset Management – 17
- Lyxor International Asset Management – 15
- Krung Thai Asset Management Co Ltd – 9
- Indopremier Investment Management – 8
- CIMB-Principal Asset Management – 4
Top 5 ETF providers by market capitalization of ETFs:
- BlackRock Singapore Ltd – USD 576 million
- Nikko Asset Management Asia Limited – USD 532 million
- AmInvestment Services Berhad – USD 353 million
- State Street Global Advisors – USD 348 million
- Deutsche Asset Management – USD 150 million
As you can see, number of ETFs listed does not determine the size of assets managed by each ETF provider.
What types of ETFs are available in Southeast Asia?
Most of ETFs available on the ASEAN exchanges are geographic focus. There are only 9 out of 81 ETFs focus on commodities, which more than half of it invests in gold (all listed on Thailand Stock Exchange). The other commodities ETF listed in Singapore have more diverse commodities investment, which includes energy, precious metals, base metals, agriculture and livestock.
The two pie charts above are showing the breakdown of number and market capitalization of ETFs with geography mandate (excludes the commodities ETFs). Taking a closer look, nearly half (47%) of these funds have ASEAN region/country focus. Indonesia and Thailand have the highest number of specific country mandated funds, whereas Singapore has the highest amount of investment.
Are you buying what you want to buy?
The concept of ETF investment may sound simple, but it is not as straight forward as it seems. Just like any investment (regardless of commodities, stocks, bonds, or unit trusts), purchasing of ETFs also requires thorough understanding of the investment decision.
|Major Underlying Assets||Number of ETF||Total ETF Market Cap (USD mil)|
The following six ETFs provided by Krung Thai Asset Management and Maybank Asset Management Thailand may seem like a good exposure to China, Emerging Markets, Europe, Hong Kong, Japan and USA, but the sole investment of the ETFs are other ETFs in other countries:
- KTAM Hong Kong ETF Tracker (HK TB)
- Maybank Emerging ETF (MEM TB)
- Maybank Euro ETF (MEU TB)
- Maybank Japan ETF (MJP TB)
- Maybank US ETF (MUS TB)
- W.I.S.E. KTAM CSI 300 China Tracker (CHINA TB)
Even some of the ETFs with China mandate do not actually invest directly in China. For examples:
- CIMB FTSE China 50 ETF (CIMBC25 MK) invest in H-Shares, Red Chips and P Chips;
- Lyxor UCITS ETF China Enterprise HSCEI – USD (ASI SP) only invests in H-Shares; and
- United SSE 50 China ETF (USSE50 SP) invests to China stocks via P-notes; and
- W.I.S.E. KTAM CSI 300 China Tracker (CHINA TB) invests in BOCI-Prudential’s ETF domiciled in Hong Kong which has investment in A-share and derivative instrument linked to A-shares.
Are mutual funds in ASEAN the walking dead?
ETFs are gaining traction in Asian countries such as Taiwan, Hong Kong, Japan and Korea. However the S.E. Asia countries’ investors have not adopted the passive investment strategies. In 2012, mutual fund assets under management (AUM) reached USD 265 billion. The AUM is significantly larger than USD 2.5 billion ETFs’ assets. However there is major growth opportunity for Southeast Asian ETF business with introduction of more investment strategies and greater adoption.
List of ETFs on S.E. Asia exchanges as of 4th April 2016 (click to enlarge):
- Data were extracted from Bloomberg as of 4th April, 2016.
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