Nikko launches Singapore dollar corporate bond ETF on SGX

Aug 31st, 2018 | By | Category: Fixed Income

Nikko Asset Management has launched the Nikko AM SGD Investment Grade Corporate Bond ETF (NIKIGCB SP) on Singapore Exchange (SGX). The fund is the first ETF listed on the exchange to provide exposure to investment grade corporate bonds denominated in the local currency.

Singapore dollar ETFs Singapore stock exchange

The ETF is the first to be launched in Singapore that provides exposure to investment grade corporate bonds issued in the local currency.

The ETF tracks the iBoxx SGD Non-Sovereigns Large Cap Investment Grade Index, providing exposure to a diverse portfolio of more than 100 corporate bonds issued by over 50 high quality issuers.

The fund may appeal to investors who are searching for higher yields within the local investment grade fixed income space.

The underlying index currently yields 3.2%, notably higher than the 2.2% offered by government securities and 0.9% offered as an average of local bank deposits.

The index has a modified duration of 4.7 years and an average credit rating of ‘A’. Approximately 10% of the index is made up of bonds rated ‘AA’ with the remaining exposure split approximately equally between bonds rated ‘AAA’, ‘A’ and ‘BBB’.

Bonds from companies based in Singapore make up three-quarters of the total index weight, with the remaining exposure from foreign issuers. Other notable country exposures are China (5.2%), Australia (4.8%), and Canada (3.1%).

Bonds issued by Statutory Boards (organisations that have been given autonomy by the Singapore government to perform an operational function) and bonds issued by banks each make up a quarter of the total index weight. The next largest sector exposures are investment companies (9.8%), insurance firms (6.7%), real estate companies (6.1%), and REITs (5.6%).

According to Nikko, the fund has garnered strong investor interest, accumulating almost S$83 million ($60m) in assets under management during its subscription period.

Eleanor Seet, President, Nikko Asset Management Asia, said, “The warm reception reflects the appetite for a high quality asset class. Importantly, this ETF provides diversification and accessibility at a low cost, which I believe investors recognise. With greater ease of access to SGD-denominated bonds, we hope to see even more participation in the Singapore bond market.”

Chew Sutat, Head of Equities and Fixed Income, SGX, added, “We are delighted to welcome the listing of Nikko AM SGD Investment Grade Corporate Bond ETF, the first-of-its-kind in Singapore, providing a highly convenient option for investors to diversify their investment portfolio and allocation into a basket of investment grade corporate bonds through a single low-cost investment on the exchange.”

The ETF has an expense ratio of 0.30%. Income is distributed to investors on a quarterly schedule.

The launch brings the number of ETFs listed on SGX to 51.

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