ETF Centre

NikkoAM ETFs product update

Amidst rising price pressures that have been intensified by the Russia-Ukraine conflict, and the increasing concerns on economic growth, here's what Nikko AM has to say about its impact on Singapore's growth this year as it provides updates on a few of its ETFs.

Nikko Asset Management
Nikko Asset Management25 May 2022 2334 Views
NikkoAM ETFs product update

Fund specific news/market analysis

1. Nikko AM Singapore STI ETF

Highlights
  • In Singapore dollar (SGD) terms, the Nikko AM Singapore STI ETF returned -0.84% in April and recorded an annualised gain of 8.71% since inception.
  • For the month, the Straits Times Index (STI) fell 0.82% on a total return (TR) basis in SGD terms. In terms of sectors, utilities and communication services were the best performers in April, while consumer staples and financials were the worst performers.
  • Of the 30 component stocks in the index, Jardine Cycle & Carriage, Yangzijiang Shipbuilding and Sembcorp Industries were the three best performers in April. Conversely, Keppel DC REIT, United Overseas Bank and DBS Group were April’s worst performing STI stocks.

Astra profit contributions propelled Jardine Cycle & Carriage to robust 1Q22 performance                                                                                                                                 

In an interim management statement issued on 27 April, Jardine Cycle & Carriage (JC&C)—the investment holding company of the Jardine Matheson Group in Southeast Asia—posted an improved performance in the first quarter of 2022 (1Q22), compared to the year-ago period, driven by higher contributions from Indonesian-based Astra and other strategic interests. Astra, which JC&C has a 50.1% interest in, enjoyed a broad-based improvement across all its divisions as overall earnings surged 84% in 1Q22, on the back of the ongoing domestic economic recovery and higher commodity prices. JC&C also added that while “it is encouraged by the good performance achieved in the first quarter, it remains cautious about the uncertainties arising from the pandemic and geopolitical tensions for the rest of the year”. Jardine Cycle & Carriage was the best performing STI-component stocks in April.


DBS reported lower 1Q net profit
Southeast Asia's largest lender DBS reported on 29 April a net profit of SGD 1.8 billion for its first quarter ended 31 March. While this represented a 10% year-on-year (YoY) decline, the bank’s top executives attributed the performance to a high base for wealth management and treasury markets activities a year ago. In other metrics shared by the Group, net interest income for the quarter grew 4% YoY to SGD 2.19 billion. Net interest margin, a key gauge of a lender's profitability, stood at 1.46%, up 3 basis points from the previous quarter, the first increase in net interest margin in three years. “While some activities such as wealth management will be affected, our overall business pipeline continues to be healthy and we will benefit significantly from interest rate increases in the coming quarters," added chief executive Piyush Gupta. DBS was among the worst performing STI-component stock in April.


2.  Nikko AM-StraitsTrading Asia ex Japan REIT ETF 

Highlights 
  • In Singapore dollar (SGD) terms, the NikkoAM-StraitsTrading Asia ex Japan REIT ETF returned 0.07% in April and recorded an annualised gain of 5.95% since inception.
  • Asian markets were downcast after US monthly consumer price index data rose 1.2% in March, the biggest monthly gain since September 2005. The US Federal Reserve (Fed) also indicated that it was preparing a 50-basis point (bps) interest rate hike for its upcoming May meeting. However, Asian REITs proved to be more resilient, with the FTSE EPRA Nareit Asia ex Japan REITs 10% Capped Index returning 0.11% in SGD terms for the month.
  • At the sector level, hotel and resorts, and healthcare REITs were the best performers in April, while specialised and industrial REITs were the worst performers. At the individual REIT level, Brookfield India REIT, Suntec REIT and Embassy Office Parks REIT were the best performers in April. Conversely, AREIT Inc, Keppel DC REIT and ESR-REIT were the worst performers during the month.

Suntec REIT posted 1Q DPU growth
Suntec REIT, an office and retail-focused logistics REIT, announced on 26 April a distribution per unit (DPU) of SGD 2.391cents for its first quarter (1Q) ended 31 March 2022, representing a jump of 16.9% year-on-year (YoY). Furthermore, gross revenue for the quarter rose 13.9% YoY to SGD 99.2 million while net property income soared 24.9% YoY to SGD 74.3 million. This was attributed to new contributions from The Minster Building in London, and higher contributions from Singapore’s Suntec City Office and Suntec City Mall. The REIT’s manager also mentioned that it is “more optimistic about the continued recovery of the retail and convention businesses compared to a year ago”. Suntec REIT was one of the best performing Asian REITs in April.

Revenue for Keppel DC REIT fell in 1Q
Keppel DC REIT—Asia’s first pure-play data centre REIT—announced on 19 April a gross revenue of SGD 66.1 million and net property income of SGD 60.1 million for its first quarter that ended 31 March 2022. These figures represented a decline of 0.9% and 1.4% respectively from the year-ago period, driven by rising electricity costs and provisions made at its Keppel DC Singapore 1 asset as a result of an ongoing tenant dispute. Nonetheless, distributable income managed to grow 5.9% YoY to SGD 44.5 million, and Keppel DC’s portfolio occupancy remained healthy at 98.7%, with a weighted average lease expiry of 7.7 years. Keppel DC REIT was among the worst performing Asian REITs in April.


3. ABF Singapore Bond Index Fund

Highlights 
  • The Fund returned -0.96% in Singapore dollar (SGD) terms, while its benchmark returned -0.91% in SGD terms. The Fund's portfolio characteristics remained close to its benchmark as at end- April.
  • Singapore Government Securities (SGS) yield ended higher in April, but outperformed US Treasuries (USTs). The benchmark 2-year yield ended up 16 basis points (bps) to 2.004%, and the benchmark 10- year yield was up 19.2 bps to 2.519%. Government bonds underperformed sub-government securities.
  • In March, non-oil domestic exports (NODX) and industrial production growth both moderated to a higher-than-expected figure. Inflationary pressures saw a sharp increase in March with the headline consumer price index (CPI) inflation jumping to 5.4% year-on-year (YoY). Similarly, its core inflation measure rose to 2.9% YoY.
  • Singapore economy grew by 3.4% YoY in the first quarter of 2022. Monetary Authority of Singapore (MAS) announced an aggressive tightening of foreign exchange (FX) policy. It expects gross domestic product (GDP) growth to remain within the official forecast range of 3-5% in 2022, but raised the headline and core inflation forecast range. The Singapore government further relaxed the COVID-19 restrictions.

Singapore Government Securities (SGS) outperformed US Treasuries (USTs) in April
The UST yield curve shifted higher in April, with yields climbing between 38.1 to 59.7 basis points (bps) across the curve. Hawkish March Federal Open Market Committee (FOMC) minutes prompted the initial move higher in yields. Notably, the minutes revealed that the members were inclined towards more aggressive rate hikes in the upcoming policy meetings. In addition, the declared pace of asset reduction was at the high end of consensus expectations. Mid-month, the US reported headline consumer price index (CPI) increased by 8.5% year-on-year (YoY) in March, the fastest annual gain since December 1981, partly due to rising food and energy costs, triggering yields to push higher anew. The benchmark 5-year UST yield briefly breached 3% towards month-end, following a more hawkish guidance from several US Federal Reserve (Fed) officials – including the Fed chairman. The yields subsequently showed signs of stabilizing, as market focus turned to concerns on the slowing global growth, amid the continued surge in COVID-19 cases in China and a much weaker-than-expected first-quarter US gross domestic product (GDP) figures. At the end of the period, the benchmark 2-year and 10-year UST yields were at 2.718% and 2.937% respectively, 38.1 bps and 59.7 bps higher compared to end-March.

SGS yields ended higher in April but outperformed their UST counterparts. At the end of the month, the benchmark 2-year yield was up 16 bps to 2.004%, and the benchmark 10-year yield was up 19.2 bps to 2.519%. Government bonds outperformed sub-sovereign securities, with the Markit iBoxx ABF Singapore Govt Total Return (TR) Index returning at -0.82%, compared to -1.64% monthly returns for the Markit iBoxx ABF Singapore Sub-Sovereigns TR Index.


4. Nikko AM SGD Investment Grade Corporate Bond ETF

Highlights 
  • The Fund returned -0.90% in Singapore dollar (SGD) terms in April. The Fund's portfolio characteristics remained close to its benchmark as at end- April.
  • The iBoxx SGD Non-Sovereigns Large Cap Investment Grade Index returned -0.84% in April, as credit spreads widened 5 basis points (bps) and benchmark yields rose.
  • Singapore Government Securities (SGS) yield ended higher in April, but outperformed US Treasuries (USTs). The benchmark 2-year yield ended up 16 basis points (bps) to 2.004%, and the benchmark 10-year yield was up 19.2 bps to 2.519%. There were three major issues in the month – the SGD 600 million issue from PSA Treasury Pte. Ltd, the SGD 400 million issue from CL1 Treasury and SGD 300 million issue from Sembcorp Financial Services.
  • In March, non-oil domestic exports (NODX) and industrial production growth both moderated to a higher -than-expected figure. Inflationary pressures saw a sharp increase in March with the headline consumer price index (CPI) inflation jumping to 5.4% year-on-year (YoY). Similarly, its core inflation measure rose to 2.9% YoY.
  • Singapore economy grew by 3.4% YoY in the first quarter of 2022. Monetary Authority of Singapore (MAS) announced an aggressive tightening of foreign exchange (FX) policy. It expects gross domestic product (GDP) growth to remain within the official forecast range of 3-5% in 2022 but raised the headline and core inflation forecast range. The Singapore government further relaxed the COVID-19 restrictions.

Singapore Investment Grade Corporate Bonds fell in April
The iBoxx SGD Non-Sovereigns Large Cap Investment Grade Index returned -0.84% in April, as credit spreads widened 5 basis points (bps) and benchmark yields rose. At month-end, overall spreads was at 87 bps (vs government benchmark), and the overall index yield rose to 3.42%.

The UST yield curve shifted higher in April, with yields climbing between 38.1 to 59.7 bps across the curve. Hawkish March Federal Open Market Committee (FOMC) minutes prompted the initial move higher in yields. Notably, the minutes revealed that the members were inclined towards more aggressive rate hikes in the upcoming policy meetings. In addition, the declared pace of asset reduction was at the high end of consensus expectations. Mid-month, the US reported headline CPI increased by 8.5% year-on-year (YoY) in March, the fastest annual gain since December 1981, partly due to rising food and energy costs, triggering yields to push higher anew. The benchmark 5-year UST yield briefly breached 3% towards month-end, following more hawkish guidance from several US Federal Reserve (Fed) officials – including the Fed chairman. Yields subsequently showed signs of stabilizing, as market focus turned to concerns on the slowing global growth, amid the continued surge in COVID-19 cases in China and a much weaker-than-expected first-quarter US GDP figures. At the end of the period, the benchmark 2-year and 10-year UST yields were at 2.718% and 2.937% respectively, 38.1 bps and 59.7 bps higher compared to end-March.

In Singapore, the Monetary Authority of Singapore (MAS) announced that it would re-centre the mid-point of the policy band at the “prevailing level” of SGD nominal effective exchange rate (NEER), and increase the slope of appreciation “slightly” while keeping the width of the policy band unchanged. SGS yields ended higher in April but outperformed their UST counterparts. This was due to 1) MAS’ tighter monetary policy stance (which implies a stronger Singapore dollar relative to the basket of currencies), supporting demand for SGD assets; and 2) upcoming scheduled auctions in 2 and 5-year SGS, providing technical support to longer duration Singapore government bonds. At the end of the month, the benchmark 2-year yield was up 16 bps to 2.004%, and the benchmark 10-year yield was up 19.2 bps to 2.519%. Meanwhile, there were three major issues in the month – the SGD 600 million issue from PSA Treasury Pte. Ltd, the SGD 400 million issue from CL1 Treasury and SGD 300 million issue from Sembcorp Financial Services.



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In this article

SGX: G3B

Amova Singapore STI ETF SGD (DIst) Class
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