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ASEAN market highlights into 2014

The ASEAN Economic Cooperation (AEC) plan is designed to enhance the economic synergy of the ten member states through four key objectives of a more unilateral production base, a more competitive region, more equitable development and a bigger regional role of ASEAN in the global economy.

A number of industry initiatives have been implemented to enhance efficiency and integration in the region, such as the ASEAN Trading Link which provides efficient regional market access for emerging brokerage companies. Financial services including real estate development and management are indeed an important aspect of the regional development and have made up almost 40% of the amounts raised by the initial public offerings (IPOs) in 2013 and the 2014 year thus far.  According to Bloomberg, in 2013 and the 2014 YTD,  ASEAN has produced 160 IPOs with more than US$18 billion in capital raising.

As it now stands, ASEAN maintains 12% of Asia Pacific market capitalisation. This is similar to its share in Asia Pacific’s Gross Domestic Product (GDP) at 10%. The combined GDP of ASEAN stood at US$2.3 trillion as of the end of 2012 which was 25% larger than India's GDP for that year. An ASEAN member breakdown of that GDP can be found here.

Key ASEAN economic growth drivers that have been identified by the world’s largest economic institutions are domestic demand, credit expansion and rising middle class incomes. This has been complemented by significant growth in Foreign Direct Investment (FDI).   

Going forward it is envisaged that a number of new listings will be composed of infrastructure-related assets, which business trusts and real estate investment trusts (REITs) can facilitate. The known project pipeline of infrastructure requirements for the region over the next five years amounts to approximately US$1000 per person across the ASEAN region.

The largest IPO in the year thus far has been OUE Commercial REIT in Singapore which raised S$346 million (US$274 million) in January. With an offer price of S$0.80, the trust is now trading at S$0.795. The second largest IPO of the year thus far was Hemraj Industrial Property & Leasehold Fund in Thailand which raised US$146 million in January. With an offer price of THB 10.00, the Fund is now trading at THB 9.40.

ASEAN related stocks listed on SGX

ASEAN is well represented on SGX with more than 50 stocks with market capitalisation of more than S$500 million reporting recent revenues from ASEAN countries outside of Singapore. Among these securities, 12 are constituents of the Straits Times Index (STI) - Jardine Strategic Holdings, Jardine Matheson Holdings, DBS Group Holdings, OCBC Bank, United Overseas Bank, Wilmar International, Hongkong Land Holdings, Jardine Cycle and Carriage, Thai Beverage, CapitaMalls Asia, Golden Agri-Resources and Thai Beverage. More details can be found here.

FTSE ASEAN 40 Index

The FTSE ASEAN 40 Index is a key bellwether for the region, with associated Exchange Traded funds (ETFs) traded on Singapore Exchange (SGX) and Bursa Malaysia (KLSE). In the year to date, the US dollar counter of the CIMB ASEAN 40 ETF has gained 3.7%, bringing its three year gain to 9.6% on a total return basis. Since its listing in September 2006,  the ETF has averaged an annualized total return of 9.3% according to Bloomberg. The Net Asset Value (NAV) of the ETF as of yesterday was US$10.493 per unit.

Together, the 40 constituents of the CIMB ASEAN 40 ETF represent five ASEAN exchanges: Indonesia Stock Exchange (IDX), KLSE, the Philippine Stock Exchange (PSE), SGX and the Stock Exchange of Thailand (SET). The 40 component stocks of the CIMB FTSE ASEAN 40 ETF from the five aforementioned exchanges represent 19 different ICB Sectors. This is a similar sector to index diversification ratio as the Straits Times Index (STI). In total there are a dozen stocks that represent ASEAN banks and five stocks that represent ASEAN mobile telecommunication providers.

On SGX, investors may trade in CIMB FTSE ASEAN 40 ETF units listed in US dollars (primary/base currency) or Singapore dollars (secondary currency). The CIMB FTSE ASEAN 40 ETF was reclassified as an Excluded Investment Products (EIP) last year. This means can be bought and sold by retail investors without having to complete a Customer Assessment Review (CAR) with their brokers. Most of the ETFs listed on SGX and all futures contracts are categorised as Specified Investment Products (SIP).

The complete list of ETFs that track the equity indices of ASEAN are detailed in the table below.

ETFs on SGX SGX Trading Board
Code Currency Lot Size
DB X-TRACKERS MSCI INDONESIA INDEX UCITS ETF KJ7 USD 10
LYXOR ETF MSCI INDONESIA P2Q USD 10
DBXT MSCI MALAYSIA INDEX UCITS ETF LG6 USD 10
LYXOR ETF MSCI MALAYSIA G1M USD 10
DB X-TRACKERS MSCI PHILIPPINES IM INDEX UCITS ETF N2E USD 10
DB X-TRACKERS MSCI SINGAPORE IM INDEX UCITS ETF O9A USD 10
NIKKO AM SINGAPORE STI ETF G3B SGD 100
ISHARES MSCI SINGAPORE (FREE) INDEX FUND I19 USD 100
SPDR® STRAITS TIMES INDEX ETF ES3 SGD 1,000
DB X-TRACKERS MSCI THAILAND INDEX UCITS ETF LG7 USD 10
LYXOR ETF THAILAND (SET50 NET TR) P2P USD 10
DB X-TRACKERS FTSE VIETNAM UCITS ETF HD9 USD 10
CIMB FTSE ASEAN 40 ETF M62 USD 100
CIMB FTSE ASEAN 40 ETF QS0 SGD 100

Source: SGX

Equity Index Derivatives

SGX also lists for trading four equity index futures contracts that are based on ASEAN equity indices. The contracts specifications of the four contracts are detailed in the table below. The majority of the aforementioned ASEAN GDP is represented in these four equity index futures contracts.

Contract SGX Code Contract Size# Initial Margin* Bloomberg Ticker
SGX MSCI Indonesia Index Futures ID US$2 x Futures price US$605 IDOA <INDEX>
    ≈ US$11,100    
SGX MSCI Thailand Index Futures TH US$20 x Futures price US$495 SSTA <INDEX>
    ≈ US$9,600    
SGX-PSE MSCI Philippines Index Futures PH US$10 x Futures price US$550 SSPA <INDEX>
    ≈ US$11,000    
SGX MSCI Singapore  Index Futures SG S$200 x Futures Price S$1,980 QZA <INDEX>
    ≈ S$71,500    

#Contract size is indicative based on 31 March 2014 closing price.

*Initial Margins subject to change. The latest margin schedule can be found here

FTSE ASEAN Stars Index

As reported by the Bangkok Post today (click here), the IDX, PSE, SGX, KLSE, SET in addition to Ho Chi Minh City Stock Exchange (HOSE) and Hanoi Stock Exchange (HNX) will soon sign agreements for the new index to be launched in Indonesia.

The FTSE ASEAN Stars Index comprises of 30 companies from each ASEAN exchange with the exception of Vietnam where 15 companies are selected from the Ho Chi Minh and Hanoi Stock Exchanges respectively.  For Malaysia, Singapore, and Thailand, constituents of the FTSE Bursa Malaysia KLCI, FTSE SET Large Cap Index, and the STI will represent their respective markets in the FTSE ASEAN Stars Index. 

The index will contain 180 companies in total. The constituents of the FTSE ASEAN Stars Index is available on the ASEAN Exchanges website here under “ASEAN Stars by Market”.  The FTSE ASEAN Stars Index is intended as a barometer and will not be used as the basis for investment products.

Two other key indices to be launched are the FTSE ASEAN All-Share Index (with a number of sector indices based on the Industry Classification Benchmark)and the FTSE ASEAN All-Share ex Developed Index.

www.sgx.com/mygateway

Geoff Howie
Geoff Howie

Mr Howie is the Singapore Exchange's Market Strategist - and the key contributor to the educational content and market insights of SGX My Gateway. He is also part of the Associate Faculty at SIM University,  educating students on the fundamentals of investing. 

He previously held lead broking and strategist roles across the Asia Pacific offices of a large international futures broker. Outside of his 15 year career in the financial markets he has also served as the Treasury Adviser to the Leader of the Queensland Liberal Party in Queensland Parliament.

Following High School in Hong Kong, he attended University of Queensland, receiving a Bachelors and Master's degree in Economics, the latter extending into deferred PhD work after receiving the highest grading for first-mover research and modelling conducted on the Shanghai economy.

Mr Howie's other notable achievements include receiving two Hong Kong Securities Institute Outstanding Achievers awards for the 2005 year.