SGX Market Strategist, Equity & Fixed Income, Singapore Exchange Ltd (SGX)

Geoff Howie

SGX Market Strategist, Equity & Fixed Income

Asia’s leading multi-asset exchange

Singapore Exchange Ltd (SGX)

Singapore Exchange is Asia’s leading and trusted market infrastructure, facilitating the exchange of capital and ideas to create value for people, businesses and economies. As a multi-asset exchange operating equity, fixed income and derivatives markets to the highest regulatory standards, SGX is a vertically integrated business that provides listing, trading, clearing, settlement, depository and data services.

With about 40% of listed companies and over 80% of listed bonds originating outside of Singapore as well as established linkages across the region and in Europe, SGX is Asia’s most international and connected exchange. Offering a full suite of derivatives products across Asian equity indices, commodities and currencies, SGX is the world’s most liquid international market for the benchmark equity indices of China, India, Japan and ASEAN.

As Asia’s pioneering central counterparty, SGX is globally recognised for its risk management and clearing capabilities, and was one of the first globally to adopt the Principles for Financial Market Infrastructure.

Headquartered in AAA-rated Singapore, SGX has over 800 employees including offices in Beijing, Chicago, Hong Kong, London, New York, Mumbai, San Francisco, Shanghai and Tokyo.

Equity Bottom-Up

Ind & Comm Bk Of China (A) / Equity Bottom-Up

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The NikkoAM-ICBCSG China Bond ETF will be listed on the Singapore Exchange on 24 November 2020, offering investors low cost and direct access to the world’s second-largest bond market. The ETF tracks the ChinaBond ICBC 1-10 Year Treasury and Policy Bank Bond Index, which offers an indicative index yield of 3.36%.  
	 </li>
	<li>
The ChinaBond ICBC 1-10 Year Treasury and Policy Bank Bond Index invests in CNY-denominated bonds issued by the Chinese treasury and policy banks with credit quality of A1 or A+ as rated by Moody’s, S&amp;P and Fitch. As Chinese policy bank bonds yield 0.30-0.50% higher than Chinese government bonds, the fund is expected to offer a highly competitive yield.  
	 </li>
	<li>With gradual inclusion of Chinese government bonds and policy bank bonds by major index providers, demand for China bonds is expected to increase. In the YTD, foreign institutional holdings of onshore China bonds have crossed US$400 billion.</li>
</ul>
The <a href="https://www.nikkoam.com.sg/etf/china-bond-etf?gclid=EAIaIQobChMIx9adusaS7QIVTA4rCh2fYAV5EAAYASAAEgK1cfD_BwE">NikkoAM-ICBCSG China Bond ETF</a>, managed by Nikko Asset Management, will be listed on the Singapore Exchange on 24 November 2020, kicking off with US$192 million in assets under management. The ETF is developed through a partnership between Nikko Asset Management Asia and Industrial and Commercial Bank of China, Singapore Branch as its investment advisors.

The ETF seeks to replicate the performance of the ChinaBond ICBC 1-10 Year Treasury and Policy Bank Bond Index, which offers an indicative index yield of 3.36%. Investors have the opportunity to invest in an asset class with competitive yield and to diversify their existing investment portfolios.

Key Drivers of China Bonds 

<ul>
<li>Index Inclusion of China Bonds</li>
</ul>
The Chinese government bond market currently has foreign participation rate of 8.5%, which is one of the lowest among Asian emerging markets. With gradual inclusion of Chinese government bonds and policy bank bonds by major index providers, demand for China bonds is expected to increase. In the year to date, foreign institutional holdings of onshore China bonds have crossed US$400 billion.

<ul>
<li>Internationalisation of the RMB</li>
</ul>
The RMB represents approximately 11% of the International Monetary Fund’s (IMF) Special Drawing Rights (SDR), but only approximately 2% of current world reserves are held in RMB. As global central banks increase their allocation of reserves in RMB, demand for RMB assets is expected to rise significantly.
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Chinese Policy Bank Bonds Offer Additional Yield 

The NikkoAM-ICBCSG China Bond ETF has an allocation of close to 60% into Chinese policy bank bonds. Chinese policy bank bonds are bonds issued by the China Development Bank, the Agricultural Development Bank of China and the Export-Import Bank of China. These policy banks are state-owned and their objectives include stimulating the economy and supporting growing local industries. Similar to Chinese government bonds, Chinese policy bank bonds are rated A1/A+ by Moody’s, S&amp;P and Fitch.

Comparing the most liquid portions of the yield curve (i.e. the 5-year and 10-year space) the China policy bank bonds offer 0.30% to 0.50% in yield pick-up. This is on top of the yield premium that Chinese government bonds presents over US Treasuries as a result of aggressive bond-buying programs launched by the US Federal Reserve.
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Shorter Bond Duration Offers Lower Price Volatility

The NikkoAM-ICBCSG China Bond ETF consists of bonds with maturity of less than 10 years. With the lower duration, short-term bonds are generally less sensitive to interest-rate changes.
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Fund Details

<table class="table table-striped"><tbody>
<tr>
<td>
			Fund Manager
			</td>
			<td>
			Nikko Asset Management Asia Limited
			</td>
		</tr>
<tr>
<td>
			Index
			</td>
			<td>
			<a href="http://yield.chinabond.com.cn/cbweb-mn/indices/single_index_query?locale=en_US">ChinaBond ICBC 1-10 Year Treasury and Policy Bank Bond Index</a>

			Index RIC: .CDCGH1-10TPBI

			Bloomberg code: CDCP13TR
			</td>
		</tr>
<tr>
<td>
			Base Currency
			</td>
			<td>
			Dual Fund Classes

			<ul>
<li>RMB Class (ISIN: SGXC29409643)</li>
				<li>SGD Class (ISIN: SGXC30096447)</li>
			</ul>
</td>
		</tr>
<tr>
<td>
			Indicative Yield*
			</td>
			<td>
			3.23%
			</td>
		</tr>
<tr>
<td>
			Indicative Duration*
			</td>
			<td>
			4.1 years
			</td>
		</tr>
<tr>
<td>
			Credit Quality
			</td>
			<td>
			A1/A+  by Moody’s/ S&amp;P and Fitch
			</td>
		</tr>
<tr>
<td>
			Total Expense ratio (TER)
			</td>
			<td>
			30 bps
			</td>
		</tr>
<tr>
<td>
			Replication
			</td>
			<td>
			Representative Sampling Strategy
			</td>
		</tr>
</tbody></table>
*as represented by index data 

<h4>Key Trading Specifications</h4>

<table class="table table-striped"><tbody>
<tr>
<td>
			Fund Class
			</td>
			<td>
			SGD Class (Distribution)
			</td>
			<td colspan="3">
			RMB Class (Accumulation)
			</td>
		</tr>
<tr>
<td>
			Base Currency
			</td>
			<td>
			SGD
			</td>
			<td colspan="3">
			RMB
			</td>
		</tr>
<tr>
<td>
			SGX Trading Name
			</td>
			<td>
			NIKKOAM-ICBCSG CNB S$
			</td>
			<td colspan="2">
			NIKKOAM-ICBCSG CNB US$
			</td>
			<td>
			NIKKOAM-ICBCSG CNB CNY
			</td>
		</tr>
<tr>
<td>
			SGX Stock Code
			</td>
			<td>
			ZHS
			</td>
			<td colspan="2">
			ZHD
			</td>
			<td>
			ZHY
			</td>
		</tr>
<tr>
<td>
			Trading Currency
			</td>
			<td>
			SGD counter
			</td>
			<td colspan="2">
			USD counter
			</td>
			<td>
			CNY counter
			</td>
		</tr>
<tr>
<td>
			RIC and BBG Ticker
			</td>
			<td>
			NIIC.SI

			ZHS SP Equity
			</td>
			<td colspan="2">
			NIIC-D.SI

			ZHD SP Equity
			</td>
			<td>
			NIIC-D1.SI

			ZHY SP Equity
			</td>
		</tr>
<tr>
<td>
			Trading Lot Size
			</td>
			<td colspan="2">
			10 shares (~S$1/share)
			</td>
			<td>
			10 shares (~US$0.7/share)
			</td>
			<td>
			10 shares

			(~CNY5/share)
			</td>
		</tr>
<tr>
<td>
			Tick Size
			</td>
			<td colspan="2">
			S$0.001
			</td>
			<td>
			US$0.001
			</td>
			<td>
			CNY 0.01
			</td>
		</tr>
<tr>
<td> </td>
			<td> </td>
			<td> </td>
			<td> </td>
			<td> </td>
		</tr>
</tbody></table>
 

Investing in ETFs

ETFs are investment funds listed and traded intraday on a stock exchange. The majority aim to track the performance of an index and provide access to a wide variety of markets and asset classes, including local stocks, international securities, bonds, commodities or money markets. 
Each ETF gives investors access to the performance of the asset that comprises the underlying index. Investing in the ETF is also less costly if one was to build a similar portfolio by buying the individual stocks. It also provides exposure to international markets and asset classes that may be inaccessible to individual investors. 
To find out more about Fixed Income ETFs, click <a href="https://www.sgxacademy.com/home/infographics/what-you-need-to-know-about-fixed-income-exchange-traded-funds-etfs/">here</a>.
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The NikkoAM-ICBCSG China Bond ETF will be listed on the Singapore Exchange on 24 November 2020, offering investors low cost and direct access to the world’s second-largest bond market. The ETF tracks the ChinaBond ICBC 1-10 Year Treasury and Policy Bank Bond Index, which offers an indicative index yield of 3.36%.  
	 
	
The ChinaBond ICBC 1-10 Year Treasury and Policy Bank Bond Index invests in CNY-denominated bonds issued by the Chinese treasury and policy banks with credit quality of A1 or A+ as rated by Moody’s, S&amp;P and Fitch. As Chinese policy bank bonds yield 0.30-0.50% higher than Chinese government bonds, the fund is expected to offer a highly competitive yield.  
	 
	With gradual inclusion of Chinese government bonds and policy bank bonds by major index providers, demand for China bonds is expected to increase. In the YTD, foreign institutional holdings of onshore China bonds have crossed US$400 billion.

The NikkoAM-ICBCSG China Bond ETF, managed by Nikko Asset Management, will be listed on the Singapore Exchange on 24 November 2020, kicking off with US$192 million in assets under management. The ETF is developed through a partnership between Nikko Asset Management Asia and Industrial and Commercial Bank of China, Singapore Branch as its investment advisors.

The ETF seeks to replicate the performance of the ChinaBond ICBC 1-10 Year Treasury and Policy Bank Bond Index, which offers an indicative index yield of 3.36%. Investors have the opportunity to invest in an asset class with competitive yield and to diversify their existing investment portfolios.

Key Drivers of China Bonds 


Index Inclusion of China Bonds

The Chinese government bond market currently has foreign participation rate of 8.5%, which is one of the lowest among Asian emerging markets. With gradual inclusion of Chinese government bonds and policy bank bonds by major index providers, demand for China bonds is expected to increase. In the year to date, foreign institutional holdings of onshore China bonds have crossed US$400 billion.


Internationalisation of the RMB

The RMB represents approximately 11% of the International Monetary Fund’s (IMF) Special Drawing Rights (SDR), but only approximately 2% of current world reserves are held in RMB. As global central banks increase their allocation of reserves in RMB, demand for RMB assets is expected to rise significantly.



      
    
    cms1


Chinese Policy Bank Bonds Offer Additional Yield 

The NikkoAM-ICBCSG China Bond ETF has an allocation of close to 60% into Chinese policy bank bonds. Chinese policy bank bonds are bonds issued by the China Development Bank, the Agricultural Development Bank of China and the Export-Import Bank of China. These policy banks are state-owned and their objectives include stimulating the economy and supporting growing local industries. Similar to Chinese government bonds, Chinese policy bank bonds are rated A1/A+ by Moody’s, S&amp;P and Fitch.

Comparing the most liquid portions of the yield curve (i.e. the 5-year and 10-year space) the China policy bank bonds offer 0.30% to 0.50% in yield pick-up. This is on top of the yield premium that Chinese government bonds presents over US Treasuries as a result of aggressive bond-buying programs launched by the US Federal Reserve.



      
    
    cms2


Shorter Bond Duration Offers Lower Price Volatility

The NikkoAM-ICBCSG China Bond ETF consists of bonds with maturity of less than 10 years. With the lower duration, short-term bonds are generally less sensitive to interest-rate changes.



      
    
    cms3


Fund Details




			Fund Manager
			
			
			Nikko Asset Management Asia Limited
			
		


			Index
			
			
			ChinaBond ICBC 1-10 Year Treasury and Policy Bank Bond Index

			Index RIC: .CDCGH1-10TPBI

			Bloomberg code: CDCP13TR
			
		


			Base Currency
			
			
			Dual Fund Classes

			
RMB Class (ISIN: SGXC29409643)
				SGD Class (ISIN: SGXC30096447)
			

		


			Indicative Yield*
			
			
			3.23%
			
		


			Indicative Duration*
			
			
			4.1 years
			
		


			Credit Quality
			
			
			A1/A+  by Moody’s/ S&amp;P and Fitch
			
		


			Total Expense ratio (TER)
			
			
			30 bps
			
		


			Replication
			
			
			Representative Sampling Strategy
			
		

*as represented by index data 

Key Trading Specifications




			Fund Class
			
			
			SGD Class (Distribution)
			
			
			RMB Class (Accumulation)
			
		


			Base Currency
			
			
			SGD
			
			
			RMB
			
		


			SGX Trading Name
			
			
			NIKKOAM-ICBCSG CNB S$
			
			
			NIKKOAM-ICBCSG CNB US$
			
			
			NIKKOAM-ICBCSG CNB CNY
			
		


			SGX Stock Code
			
			
			ZHS
			
			
			ZHD
			
			
			ZHY
			
		


			Trading Currency
			
			
			SGD counter
			
			
			USD counter
			
			
			CNY counter
			
		


			RIC and BBG Ticker
			
			
			NIIC.SI

			ZHS SP Equity
			
			
			NIIC-D.SI

			ZHD SP Equity
			
			
			NIIC-D1.SI

			ZHY SP Equity
			
		


			Trading Lot Size
			
			
			10 shares (~S$1/share)
			
			
			10 shares (~US$0.7/share)
			
			
			10 shares

			(~CNY5/share)
			
		


			Tick Size
			
			
			S$0.001
			
			
			US$0.001
			
			
			CNY 0.01
			
		

 
			 
			 
			 
			 
		

 

Investing in ETFs

ETFs are investment funds listed and traded intraday on a stock exchange. The majority aim to track the performance of an index and provide access to a wide variety of markets and asset classes, including local stocks, international securities, bonds, commodities or money markets.  
Each ETF gives investors access to the performance of the asset that comprises the underlying index. Investing in the ETF is also less costly if one was to build a similar portfolio by buying the individual stocks. It also provides exposure to international markets and asset classes that may be inaccessible to individual investors.  
To find out more about Fixed Income ETFs, click here.



Gain Direct Exposure to the World’s 2nd Largest Bond Market

China

Industrial and Commercial Bank of China Limited provides banking services. The Company offers deposits, loans, fund underwriting, foreign currency settlement, and other services. Industrial and Commercial Bank of China provides its services to individuals, enterprises, and other clients.

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ICBC (H) (1398 HK)

Gain Direct Exposure to the World’s 2nd Largest Bond Market

The NikkoAM-ICBCSG China Bond ETF will be listed on the Singapore Exchange on 24 November 2020, offering investors low cost and direct access...

Singapore Exchange Ltd (SGX)

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