3 more HK blue chips available in bite-size amounts on SGX, bringing total to 8
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The Singapore depository receipts of (clockwise from top left) Ping An Insurance, Xiaomi and Meituan will be traded on the SGX.
PHOTOS: BLOOMBERG, REUTERS
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SINGAPORE – Retail investors in Singapore can invest directly in three more blue chip companies listed in Hong Kong from March 5.
The three are Ping An Insurance, an integrated financial, healthcare and eldercare service provider in China; Xiaomi, the world’s third-largest smartphone vendor; and Meituan, the biggest online food delivery platform in China.
The Singapore depository receipts (SDRs) of these three Hong Kong companies will be traded on the Singapore Exchange (SGX), joining five other Hong Kong SDRs that started trading earlier,
SDRs are financial instruments that represent ownership in a foreign stock or security, but which are listed on the SGX. The concept is similar to American depository receipts of non-US companies listed on the US stock exchanges.
SGX Group noted that the eight Hong Kong SDRs make up more than 40 per cent of the benchmark Hang Seng Index and cover sectors from technology to consumer and financials.
This allows retail investors to ride on thematic trends such as the growth in artificial intelligence (AI), the global shift towards electric vehicles (EVs), and the rise in e-commerce activities, while at the same time benefiting from the stability and dividend yields offered by financials.
The first batch of eight SDRs in Singapore were linked to blue chip companies in Thailand
They cover more than 40 per cent of the benchmark SET50 Index and eight sectors. The eight Thai SDRs are linked to:
Telco conglomerate Advanced Info Service;
Delta Electronics, a beneficiary of the trend towards EVs and data centres;
Gulf Energy, an energy producer with both conventional and renewable energy businesses;
Kasikorn Bank, which is in the small and medium-sized enterprise and high-net-worth spaces;
Siam Cement, a conglomerate with businesses in industrial materials such as cement, building materials, chemicals and packaging;
Airport operator Airports of Thailand;
CP All, which operates 7-Eleven convenience stores in Thailand; and
PTT Exploration and Production, Thailand’s national oil and gas company.
With these eight Thai and eight Hong Kong SDRs, the exchange now lists 16 such financial instruments. The SGX noted that as a product class, SDRs have been well received by the market.
Ms Serene Cai, its head of securities trading, said the SDRs are seeing “growing investor adoption from local and regional markets like Malaysia and South Korea”.
The daily average value of SDRs traded on the SGX has increased eight times since October, when the Hong Kong SDRs were launched, to $4 million in February.
The daily average value is the total trading value over a period divided by the number of trading days for the period.
It gives an average measure of the trading activity level of the SDRs on a given day.
When it increases, it means there are higher trading volumes on the stock exchange, making it easier for investors to buy or sell shares.
The top three most traded Thai and Hong Kong SDRs are Delta Electronics, BYD and Tencent.
The bourse operator said Delta Electronics has a daily average value of $150,000, while BYD and Tencent trade close to $1 million each daily.
Meanwhile, total assets under management or the market value of the SDR investments grew five times to more than $30 million, with more than 50 per cent of the AUM held by retail investors, the SGX said.
Phillip Securities, as the issuer of the SDRs, holds the underlying securities on trust on behalf of investors.
The SDRs are designed so that investors do not need to fork out large amounts of capital to invest in the underlying stock.
This is achieved by breaking down each Hong Kong- or Thai-listed share into SDR units. The ratio varies depending on how the SDR issuance is structured.
In the case of the three new Hong Kong SDRs, Xiaomi and Ping An are issued on a two-to-one basis, meaning every two SDRs represent one share of the stock listed in Hong Kong. As for Meituan, every five Meituan SDRs on the SGX represent one Meituan share in Hong Kong.
This essentially means that an investor in Singapore needs between $400 and $600 to invest in any one of the three SDRs, rather than a few thousand dollars for the Hong Kong stocks, the SGX noted.
Similarly, the other five Hong Kong SDRs are issued in varying ratios. For Tencent and BYD, the ratio is 10 SDRs for every one Tencent or BYD share. Alibaba and HSBC SDRs are issued on a five-to-one basis, while Bank of China’s is one-to-one.
Ms Cai said that the growing investor interest highlights the demand for more accessible investment sizes, especially for high-investment stocks like BYD and Tencent.
“Approximately 70 per cent of retail SDR trades are smaller than Hong Kong’s board lot,” she added.
Separately, six of the Thai SDRs are issued on a one-to-one basis, with the remaining two – Advanced Info Service and Siam Cement – issued on a 10-to-one basis.
All shares, as well as SDRs, on the SGX are traded in board lots of 100 units.
SDR prices, like share prices, will be reflected in single units so it is easier for investors to gauge how much they need to spend for a board lot of 100.
The SGX noted that the smaller minimum investment amounts “give investors the flexibility” to build and manage their investment portfolios.
The bourse operator “aims to include more Thai and Hong Kong underlyings by mid-2025”.
Mr Gerald Wong, chief executive of investment advisory platform Beansprout, noted that while these 16 SDRs allow investors to take advantage of emerging themes, they are best suited for the satellite portion of a typical core-satellite portfolio.
The satellite component is the part of an investor’s portfolio comprising investments that carry some risks for higher returns, while the core or the heart of the portfolio is made up of more stable and passive investments.
The core-satellite approach is regarded by financial experts as a way to build a well-diversified portfolio at relatively low costs.
Investors should still have some exchange-traded funds that track equity indices as the core component to ensure that there is diversification and long-term stability in their portfolios, Mr Wong said.
