The SGD Investment Grade Corporate Bond ETF is benchmarked to the iBoxx SGD Non-Sovereigns Large Cap Investment Grade Index. In a statement, Nikko said it is the first exchange-traded product sold in the Lion City investing in Singapore dollar-denominated corporate bonds.
There is no high yield bond exposure because the benchmark index is comprised of large-cap investment grade corporate bonds, with an average issue size of around S$300m ($220.4m).
The index tracks 102 bonds from 45 issuers. The holdings include Housing Development Board, Temasek Financial, Land Transport Authority, DBS and United Overseas Bank, according to the firm’s statement.
The index has a current yield-to-maturity of 3.2% and the product will pay a dividend once a year, which will depend on the dividends distributed by the underlying bonds. It returned roughly 3.75% per annum over the last five years through June this year.
According to data provided by the firm, the annual return compares to 1.95% by the iBoxx ABF Singapore Government Total Return Index and 4.25% by the FTSE Straits Times Index STI Total Return Index.
MAS an investor?
Singapore-based Business Times reported that the country’s financial regulator, the Monetary Authority of Singapore (MAS), is a seed investor in the ETF.
Nikko AM was contacted for confirmation, but the firm declined to comment.
Eleanor Seet, president at Nikko AM Asia, explained to The Business Times that the regulator has had an initiative to strengthen the domestic bond market.
“This is very much in line with a lot of the strategic initiatives that the MAS has always had in terms of growing the bond market locally … Anything that broadens, deepens the liquidity and breadth of the local bond market is so important,” the report said, quoting Seet.
Nikko AM has listed three other ETFs in Singapore, the Straits Trading Asia ex Japan REIT ETF, the Singapore STI ETF and the ABF Singapore Bond Index Fund.