BlackRock (Singapore) Limited, a unit of the world’s largest asset management company, on Wednesday announced it is extending its iShares fixed income exchange traded fund (ETF) offerings in Singapore with the listing of two new Asian fixed income ETFs in a bid to give investors more investment access to one of the world’s fastest growing regions.
The new iShares Barclays Capital USD Asia High Yield Bond Index ETF and iShares Barclays Capital Asia Local Currency 1-3 Year Bond Index ETF are expected to take advantage of the region’s improving economic fundamentals and better corporate profile with investments on baskets of Asian currency, credit and high yield bonds.
“Driven by domestic consumption and exports, Asian economies are recording faster growth than any other developed markets. Market conditions in the US and Europe are leading investors to increasingly turn to Asian fixed income markets, which offer higher yields and lower default rates, for returns,” said Nick Good, Managing Director and Head of iShares, Asia Pacific at BlackRock.
Asset allocation strategies are heavily leaning towards emerging markets in general and Asian high yield bonds could be major beneficiaries of that trend as economic growth trends remain robust as compared to the Western world.
Dedicated emerging market bond funds have attracted US$8.2 billion in inflows year to date, according to EPFR Global data. This contrasts with US$27.3 billion of outflows for emerging market equities.
The iShares Barclays Capital USD Asia High Yield Bond Index ETF will track the performance of a combination of USD-denominated government-related and corporate high yield debt in the Asia ex-Japan region. The countries include China, Indonesia, Hong Kong, the Philippines, India, Sri Lanka, Vietnam, South Korea, Pakistan and Singapore.
Meanwhile, the iShares Barclays Capital Asia Local Currency 1–3 Year Bond Index ETF provides access to Asia’s local currency bond markets with less sensitivity to interest rate movements than existing products due to its shorter duration. It will cover Thailand, South Korea, Malaysia, Singapore, Indonesia, the Philippines and Hong Kong bonds, with small allocations to regional corporate bonds.
ETFs are baskets of assets, such as stocks, bonds or commodities, that trade on stock exchanges. Unlike traditional mutual funds, ETFs can be bought and sold throughout the day like stocks and are also attractive to investors because they have lower fees and tax advantages compared with mutual funds.
In June this year, BlackRock introduced its first two Asian fixed income ETFs which offered exposures to a diversified portfolio of local Asian currency denominated debts from sovereign issuers such as Indonesia, Hong Kong, Malaysia, Singapore, South Korea, Thailand, and the Philippines, combined with allocations to regional corporate bonds.
“Together with iShares’ first two Asian fixed income ETFs, investors can now choose to invest in bond markets at varying levels of risk adjusted return in order to suit their investment view. All four of our fixed income ETFs listed on SGX are cash-based ETFs that invest directly in the underlying bonds,” explained Catherine Barker, Director and Head of iShares Southeast Asia at BlackRock.
Both ETFs will be listed on SGX, with trading to commence December 8, Thursday. They will both trade in board lots of 100 shares.
“Singapore is a hub for fixed income as it provides accessibility across regional markets. With improved access to the fixed income sector through SGX-listed fixed income products such as retail and corporate bonds, Singapore government bonds and fixed income ETFs, we are seeing increased interest in these products from investors,” said Nels Friets, Head of Securities at SGX.
BlackRock is the world’s leading fixed income manager managing US$1.2 trillion in fixed income assets across multiple investment approaches, and iShares is the world’s leading fixed income ETF provider, accounting for 59 per cent of total fixed income ETF assets.