|Instrument:MSCI Singapore Index Fund|
The MSCI Singapore Index ETF (SGD) is an ETF (electronic traded fund) designed to track the performance of the MSCI Singapore index. The MSCI Singapore index measures the performance of 19 large and mid-cap stocks of the Singapore market. MSCI is the benchmark index for the Singapore economy, with its constituents accounting for roughly 85% of the country’s entire equities space. The MSCI Singapore Index Fund ETF was founded on the 31st of March 1986 to help investors gain exposure to one of the most influential emerging nations, Singapore.
The MSCI Singapore index exposes seven sectors of the Singapore economy and is suitable for investors seeking exposure to large and mid-cap Singaporean stocks in their portfolios. The index has a healthy mix of constituents: large-cap stocks are known to deliver long-term sustainable growth, whereas mid-cap stocks are capable of growth, both in the short term and long run.
The MSCI Singapore index started with a base value of 100 at inception. The MSCI Singapore traditionally outperformed its sister indices (MSCI World and MSCI ACWI IMI), but since late 2015, it has slightly lagged behind them. After a dip in the aftermath of the 2008 global financial crisis, the MSCI Singapore index sustained a long-term upward drift and managed to hit its all-time high at circa 415 in April 2018. The subsequent market correction was overextended due to COVID-19 uncertainties. This correction saw the index tumble to lows of circa 275 by March 2020. However, the index has recovered impressively, and as of January 2022, it trades above the 340-mark.
Index Composition and Calculation
The MSCI Singapore ETF is a free-float capitalization-weighted index. A free-float index considers only outstanding shares held by the public and its market capitalization that determines any constituent’s inclusion and subsequent weighting in the MSCI Singapore. The index is calculated using the Laspeyres formula, with the Singaporean dollar used as the base currency. All securities, including REITs (Real Estate Investment Trusts) and some foreign listings, are eligible for inclusion.
A unique divisor and capping factor are designed to achieve liquidity, easy replicability of the index, and adequate diversification. The index is reviewed quarterly in February, May, August, and November to ensure that it accurately reflects the underlying performance of the Singapore equity universe. The cut-off points for inclusion or exclusion are recalculated during the May and November semi-annual index reviews.
Factors Influencing the Price of MSCI Singapore Index ETF
Singapore is a vibrant economy and the foremost financial hub of the Asia Pacific region. The SGD ETF is particularly heavy on financial stocks, and its price is susceptible to prevailing economic conditions and the monetary policy environment. A strong domestic economy will likely inspire higher index prices, whereas an underlying weak economy will likely trigger lower prices. Higher interest rates also imply a strong economy, and it usually inspires higher consumer index prices. In contrast, a low-interest regime, denoting a slowing economy, will usually boost lower index prices.
Singapore is a significant regional and global economic bloc, and developments in the global economy will impact its benchmark index. The country is a major exporter of electronics and services, while it is also home to the world’s second-largest port by cargo tonnage. Over time, the Singapore economy has proven to be very resilient, but its deep integration into the global economy ensures that external developments can impact the performance of its stocks. In particular, the country is a major destination of foreign capital inflows, and during harsh global economic conditions, investment can slow down in the country. The SDG ETF has foreign-based constituents that expose it to risks outside the Singaporean economy.
Why Trade the SDG ETF?
- Liquidity. The Singapore ETF has 19 of the most traded large and mid-cap stocks in Singapore. These constituents account for about 85% of the Singaporean equities universe. This makes the SDG ETF very liquid, guaranteeing that it can be traded with transparent prices and competitive spreads.
- Stable Price Action. The constituents of the SDG ETF are very liquid stocks, which makes the index quickly achieve reliable price discovery. The MSCI Singapore Index ETF typically has predictable price action, except in unusual crises in the market.
- Vast News Coverage. The MSCI Singapore is the benchmark stock index for the Singaporean market. Singapore is one of the most important global economies, and the MSCI Singapore is one of the most covered indices for emerging markets.
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