An Exchange Traded Fund (ETF) is an open-ended investment fund listed and traded on stock exchanges (e.g. SGX), that generally aims to track the performance of an underlying index (like the Straits Times Index) or asset class (like REITs).
What is an Index?
An index is formed by a basket of securities and is calculated by aggregating the value of the securities and expressing it against a base value. An index reflects the movement of an entire market. The index constituents are selected by the Index Provider from a list of securities which the index represents.
What is an Asset Class?
An asset class is a group of investments that have similar characteristics, behave similarly and are subject to similar market forces. Typical asset classes include equities (stocks), fixed income (debt), real estate, cash and commodities.
How Does an ETF Track an Index or Asset Class?
Some ETFs are created by full replication, ie. they invest directly in the underlying stocks. On the other hand, ETFs can also be created by synthetic replication through the use of some derivatives.
If the index rises by 10%, the price of the ETF is very likely to rise by 10%. For a short period of time, it is possible that the returns of an ETF are higher or lower than the returns of the underlying index. But generally in the long run, the returns of the ETF and the underlying index should be close.
What ETFs can I invest in?
To find out which ETFs you can trade in, please consult your Trading Representatives.
With the STI hitting multi year lows with a YTD decline of 20%, more investors are turning to STI tracking ETFs as a vehicle to gain instant exposure to Singapore’s top 30 blue chips.
REIT popularity in Singapore is exemplified in multiple ways they comprise about one tenth of Straits Times Index (STI) constituents, all of the STI Reserve List stocks, and approximately one tenth of the total market capitalisation of stocks listed . In this period of high market volatility, more investors are also looking to REITs ETFs for portfolio diversification.
Trade ETFs Like Shares
Similar to trading stocks, you may buy or sell ETFs through your Trading Representative or on our online and mobile platforms. Most ETFs listed on SGX are classified as Specified Investment Products (SIPs) and you are required to pass the qualifications assessment before trading ETFs. However, as of 21 May 2014, SGX has classified 9 ETFs as Excluded Investment Products (EIP) such that investors can trade these 9 ETFs without first being pre-qualified. For more information, please refer to SGX website.
Make Efficient Use of Funds
ETF units can be purchased at a lower cost compared to purchasing individual stocks, bonds or commodities to build a similar portfolio. The extent of diversification benefits depends on the constituents that make up the fund portfolio.
Get Access to a Wide Variety of Markets and Asset Classes
With ETFs, you can gain access to securities listed on SGX, as well as to commodities such as REITs, in an efficient and convenient manner.
Access Free Real-Time ETF Prices
Real-time ETF price information is readily accessible on MKE trade's platform. With the transparency that ETFs offer, you can regularly monitor and have up-to-date information on your investments.
Receive Dividends on a Regular Basis
The 12-month dividend yield of the 10 most popular dividend-paying ETFs listed on SGX, based on fund size held in Singapore, averages 4.2%^, with yields ranging from 2.0% to 6.6%^.
For more information, kindly refer to SGX website.
^Source: SGX (Data as of 20 April 2020)
In 2012, the Monetary Authority of Singapore (MAS) introduced guidelines for broking firms to provide safeguards to retail investors who wish to trade Specified Investment Products (SIPs). These products have complex features and risks that can be difficult to understand. Under these guidelines, both existing and new clients are required to be formally assessed by their broking firm for relevant knowledge and experience in trading Exchange Traded Funds (ETFs).
If you wish to qualify for ETF Trading, please visit any of our Customer Service Centres or Investor Centres to complete the Client Proficiency Assessment (CPA) Form. Alternatively, you may download the form here and mail it to:
Maybank Kim Eng Securities Pte Ltd
Client Services Department
150 Beach Road
#03-01 Gateway West
- a securities account with The Central Depository Pte Ltd (CDP)
- a trading account with Maybank Kim Eng Securities
Before you start purchasing ETF units, you should be aware of the following:
- The investment objective and strategy of the ETF;
- The information about the index/underlying asset that the ETF is tracking;
- The ETF's dividend policy;
- The fees and charges that will be borne by you as an investor;
- The channels through which trading information of the ETF will be disclosed;
- The information about the management company; and
- The risk associated with the ETF.
Transaction Fees and Charges
For brokerage/commission rates on online trades, click here.
For brokerage/commission rates on offline trades for foreign markets, please consult your Trading Representative.
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As with all financial market investments, investing in ETFs carries a certain level of risk. Here are some risks to take note of before you start investing in ETFs.
Investors are exposed to market risk or volatility of the specific underlying assets which the ETF tracks. In unfavourable market conditions (e.g. market correction or economic crisis) when the general level of stock, bond or commodity prices decline, the value of ETFs will decline accordingly. Nonetheless, ETF investments will still deliver returns close to the underlying index, bonds or commodities.
The fund manager of the ETF may not be able to exactly replicate the performance of the underlying asset. This is known as 'tracking error'. Tracking errors may occur because the methods of sampling are not 100% accurate. In addition, factors such as management fees and timing differences may reduce the returns of the ETF relative to the index returns.
When the ETF is priced in one currency (e.g. US Dollar) and is different from the functional currency of the investor (e.g. Singapore Dollar), the investor is exposed to fluctuations in foreign exchange rates, which may increase or erode investment returns on the ETF.
Interest rate risk
The risk that an investment's value will change due to a change in the absolute level of interest rates, in the spread between two rates, in the shape of the yield curve or in any other interest rate relationship.
Investors are exposed to counterparty risks of the Issuer/Manager of the ETFs. The insolvency or default of such counterparties may have an adverse impact on the investors' investments in the ETF.