S'pore set for more leveraged and inverse ETFs

A man walking past the SGX building in the central business district.
A man walking past the SGX building in the central business district. PHOTO: ST FILE

Preparations are under way in Singapore for the first new listing of leveraged and inverse exchange-traded funds (ETFs) in almost eight years.

Singapore Exchange last week published a new Web page about the products, described as "a form of passive collective investment schemes (like ETFs) and structured as open-end funds", following revised guidelines from the Monetary Authority of Singapore (MAS) in August.

Singapore, along with Hong Kong, is seeking to capture a bigger share of an expanding pie through the types of funds that have seen success in Japan, Taiwan and South Korea. 

Leveraged ETFs in Taiwan, which started in 2014, now have more than US$4.8 billion (S$6.8 billion) in assets, according to data compiled by Bloomberg.

Daily trading of inverse and leveraged funds is more than half of Taiwan's ETF market, said Cathay Securities Investment Trust president and chief executive officer Andy Chang.

Law firm Simmons & Simmons JWS partner Jek-Aun Long said: "MAS indicated its openness to leveraged and inverse ETFs in Singapore last year. We are involved in several such products in the pipeline - we can expect exciting things in the coming months."

MAS does not comment on its dealings with financial institutions and other entities, it said in a reply to queries.

A leveraged ETF uses derivatives and debt to amplify the returns of an underlying index, while an inverse fund offers a way to profit from falling markets.

Firms in Hong Kong are eyeing a March start for the products linked to popular local gauges such as the Hang Seng.

The Asian ETF market is expected to grow 18 per cent a year over the next five years, a report from PricewaterhouseCoopers said. Singapore listed the first inverse ETF in Asia in 2009, but there have been no new issues since, amid consumer protection fears.


A version of this article appeared in the print edition of The Straits Times on February 24, 2017, with the headline 'S'pore set for more leveraged and inverse ETFs'. Print Edition | Subscribe