Singapore-listed exchange-traded fund (ETF) assets surged 57% in 2020, underscoring the continued popularity of low-cost passive funds, with market players predicting further growth driven by new fund launches, institutional demand, and technology-enabled investing platforms that allow investors to trade easily.
According to Singapore Exchange (SGX), combined value of all ETFs listed on the bourse as of end-2020 was S$8.6 billion (US$6.51 billion), up from around S$5.48 billion in 2019.
ETF trading turnover last year was 2 ½ times higher at S$5.41 billion.
There were three new ETFs listed on SGX last year and each have garnered “sizeable assets under management within a short period of time”, according to Kao Shih Teng, head of product solutions at Singapore’s Lion Global Investors.
“These new ETFs provided investors with low cost, easy access to investment opportunities outside of Singapore, such as the Chinese tech-related companies in the Lion-OCBC Securities Hang Seng TECH ETF,” she tells Asia Asset Management (AAM).
Besides new products, another factor that drives the strong performance of the ETF market in 2020 was the rise of retail investors, SGX says.
"Retail investors' adoption of ETFs accelerated in 2020 as the total number of ETF retail holders jumped by 75% year-on-year," SGX tells AAM.
Kao, who predicts “exponential growth” of the ETF market this year, says the growing number of technology-enabled investing platforms has made it easy for investors to open accounts and trade.
“There is also an increase in demand from institutional investors, robo-advisory platforms, and wealth planners using ETFs as building blocks to construct their investment portfolios,” she says.
Meanwhile, SGX says that it is anticipating a "good pipeline of new ETF listings in the next 12 months covering the equities and fixed income asset classes". SGX says that the company has seen "growing investor interest towards yield-focused products, such as fixed income and REIT ETFs, which today make up 40% of the ETF assets held on SGX".
"Also, SGX has already itself as one of Asia's largest offshore trading venue for Chinese fixed income ETFs," SGX says.
Retail appetite for ETFs is likely to continue to grow, according to a fund manager at an asset management company in Singapore.
“This is the result of many years of investor education by various players, both incumbent fund management companies and robo advisers,” he tells AAM, speaking on condition of anonymity.
With the global economy expected to rebound from the slump triggered by the coronavirus crisis, he says stock markets will probably rally and drive further growth of ETFs.
“In terms of themes, I believe ETFs that have heavy exposure to the US market may not perform as well as those with exposure to emerging markets, as funds are increasingly flowing into Asian and emerging- market funds,” he adds.