Nikko to expand SGX offering with launch of SGD IG Corporate Bond ETF

Jul 23rd, 2018 | By | Category: Fixed Income

Nikko Asset Management is set to launch its fourth ETF in Singapore with the listing of the Nikko AM SGD Investment Grade Corporate Bond ETF (NIKIGCB SP) on SGX next month.

Nikko expands SGX offering with launch of SGD IG Corporate Bond ETF

Nikko AM Asia is to expand its roster of ETFs on the Singapore Exchange (SGX) with the launch of the Nikko AM SGD Investment Grade Corporate Bond ETF in August.

The ETF will become the first Singapore dollar-denominated corporate bond ETF to list on the exchange.

It will aim to replicate the performance of the iBoxx SGD Non-Sovereigns Large Cap Investment Grade Index.

Eligible bonds include fixed coupon bonds, callable and putable bonds, amortizing bonds and sinking funds, step-ups and event-driven bonds, dated and undated fixed to floater bonds.

Bonds must have at least 12 months left until maturity and a minimum of 18 months to maturity at initial issuance. They must also have a minimum amount outstanding of SGD 150m and be rated investment grade (AAA, AA, A, BBB).

Holdings are likely to include names such as Housing Development Board, Temasek Financial, Land Transport Authority, Development Bank of Singapore (DBS) and United Overseas Bank (UOB).

The fund will seek to achieve its investment objective by adopting a representative sampling strategy and may invest up to 20% in certain securities that are not included in the index but have aggregate characteristics (such as yield and duration) similar to those of the index.

Eleanor Seet, President, Nikko AM Asia, said “With this fund, we expand our repertoire of ETFs, but more importantly, we widen the asset options and tools available to investors. Diversification is an important part of investing and what we bring to investors with this ETF are diversification and accessibility at a relatively low cost. A diversified portfolio of SGD-denominated investment grade corporate bonds is a high quality asset class that has not always been easy to access especially for retail investors.”

The index has returned approximately 3.75% per annum over the last five years to June 2018. Over the same period, the iBoxx ABF Singapore Government TR Index and FTSE Straits Times Index STI TR returned 1.95% and 4.25% per annum respectively.

”We believe that a well-developed domestic bond market will benefit both institutional and retail investors in Singapore and the region. Building on the ABF Singapore Bond Index Fund launched in 2005, this ETF creates greater and ease of access to SGD-denominated bonds and encourages participation in the Singapore bond market,” added Seet.

Nikko AM’s current ETF offerings in Singapore include the NikkoAM-StraitsTrading Asia ex Japan REIT ETF, ABF Singapore Bond Index Fund and Nikko AM Singapore STI ETF.

Jacqueline Loh, Deputy Managing Director, Monetary Authority of Singapore (MAS), the city-state’s central bank and financial regulator, added, “MAS welcomes the launch of the Nikko AM SGD Investment Grade Corporate Bond ETF. While the SGD corporate bond market has seen steady growth over the years, it has been challenging for retail investors to gain exposure to a diversified portfolio of SGD corporate bonds. The launch of the ETF is a step toward filling the gap. This complements MAS’ efforts to improve retail access to simple, low-cost investment products, such as the Singapore Savings Bonds. As with all investment decisions, investors should carefully consider if the ETF is suitable for your investment needs and risk appetite.”

The fund will list on 27 August and charge a management fee of 0.15%.

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