Published Date: 28 April 2011

Opening Address by Mr Ng Nam Sin, Assistant Managing Director (Development Group), Monetary Authority of Singapore, Asian ETF Investors Summit 2011


Ladies and gentlemen,

1   I am delighted to be here with you today at the inaugural Asian ETF Investors Summit held in Singapore. I understand that the conference has generated some interest and I am happy to share with you some of my perspectives on the ETF industry.

Growth of the ETF industry – Globally and in Asia

2   The ETF industry has grown significantly since the inception of the first ETF by State Street Global Advisors to track the S&P 500 stock index in 1993. Today, the SPDR S&P 500 has growth to be the world’s largest ETF, with about US$90 billion in assets. Since that first ETF, the global ETF industry has grown to over 2,600 ETFs with over 5,900 listings, and a combined asset under management (AUM) of about US$1.4 trillion by the first quarter this year . In terms of AUM, this translates to a significant 40 percent growth.

3   In Asia, the story is consistent. As at the end of the first quarter, the Asia Pacific (ex. Japan) ETF industry had 224 ETFs with 336 listings and recorded AUM of US$57 billion.  This represents a 41% growth in terms of the number of ETF and a 40% growth in AUM compared to the same time last year.

The Asian Growth Story

4   The Asian ETF market has grown on the back of strong Asian fundamentals.  The region, according to the Asian Development Bank (ADB)’s recently released annual economic report, is forecasted to grow 7.8 percent in 2011 and 7.7 percent in 2012, much higher than the G3 economies.  East Asian economies including China, Hong Kong, Taiwan and South Korea will lead growth, expanding at an overall 8.4 percent in 2011 and 8.1 percent in 2012. Southeast Asia, including Singapore, Thailand, Malaysia and the Philippines, is expected to grow at an overall 5.5 percent in 2011 and 5.7 percent in 2012.

5   On the back of this development, several ETF providers have introduced local and regional ETFs to meet investors’ demand to gain exposure to Asia.  Such ETFs are actively traded by Asian and global investors. For example, the iShares MSCI India ETF is one of the most actively traded ETFs in the region as it provides access to the Indian market.

Rising use of ETFs by Asian Investors

6   There is rising use of ETFs by Asian investors. Institutional investors, such as pension funds, sovereign wealth funds, insurance companies, and high net worth individuals, are increasingly utilising ETFs in their portfolios.  This has led to greater demand for ETFs globally and in Asia, and hence, its growth. According to the Greenwich Associates’ 2010 Asian Investment Management Study, the deployment of ETF into Asian institutional investors’ investment strategies has grown to over 30 percent. Attributes of ETFs such as relatively higher levels of transparency, liquidity, and lower cost, are attractive to investors. 

7   Such qualities make ETFs a widely used instrument by investors for a myriad of investment strategies, such as buy and hold, gaining diversified exposure into an asset class or market, for active trading, for risk management and hedging, cash management, portfolio adjustment and thematic investments.

Developments in Singapore

8   Singapore’s ETF sector has also grown strongly in the past few years, albeit from a small base.  In the mid 2000s, there was only a handful ETFs on SGX.  Today, there are 82 ETFs listed in Singapore, with underlying in equities, fixed income, commodities and money markets.  Going by the number of ETF offerings, the Singapore ETF market has grown substantially in the Asia Pacific ex. Japan and offers investors the most international suite of ETFs in the region. More than 90% of the ETFs track non-domestic underlying (i.e. non Singapore-focused indices). 

Need for Investor Education on ETFs

9   The development of the ETF industry is not without its challenges. As the range of ETFs grows, so does the complexity of the product, particularly among the synthetic ETFs which typically use derivatives such as swaps to provide exposure into markets that are less accessible. There are also ETFs whose structures and risks might not be easily comprehended by the man in the street.

10   Given these issues, you may be aware that Singapore is refining our framework for which ETFs are included. It is aimed at providing greater investor protection such as strengthening safeguards on the use of financial derivatives and counterparty requirements, establishing new guidelines for funds which track an index, and enhancing guidelines on securities lending activities. From 1 Mar this year, we require fund providers to prepare a product highlights sheet for new offers. A product highlights sheet is also needed to be prepared by existing funds as and when the prospectuses are updated. 

11   Additionally, intermediaries will be required to assess a customer’s investment knowledge or experience if the customer wishes to purchase investment products such as ETFs.  We will continue to engage industry players and ensure that our regulatory regime for funds keeps pace with product innovation and industry developments, as well as regulatory developments in major jurisdictions.

12    In all, it is in the interest of all stakeholders to foster sustainable growth. Therefore, it is important for all sectors of the industry to work closely together, including the regulators, to strengthen investor education on ETFs in order for this instrument to be more successful in Asia. On this, I would like to commend the conference organiser for putting together this inaugural Asian ETF Investor Summit to foster investor education and facilitate exchange of knowledge and ideas among all stakeholders.  This will certainly enhance Singapore’s positioning as an international ETF listing and trading centre in Asia.

13   On this note, I wish all of you a fruitful discussion over the next two days. Thank you.