ETF Talk: Investing in Singapore’s Growth

Singapore, an economically developed Southeast Asian island nation, is rebounding, with a surprising jump of 3.7% in its economic growth in the second quarter after two consecutive years of sluggishness. The country seems to have been boosted by an unexpected rise in manufacturing and gains in the service sector. One way to invest in Singapore is through the iShares MSCI Singapore ETF (EWS).

This exchange-traded fund (ETF) tracks several of Singapore’s key business sectors, including financials, using equities from the country’s stock market. This non-diversified fund seeks investment results that correspond to the price and yield performance of the MSCI Singaporean Index. At times, the ETF will invest at least 80% of its assets in the securities of its underlying index (stocks primarily traded on the Singaporean Stock Exchange) and in depository receipts.

Last year, EWS gained 21.3%, but it did incur a sharp decline recently as the chart below shows. So far in 2013, the fund has endured a slight fall, but its 4.67% dividend yield has helped mitigate that loss. With Singapore’s economy on the ascent and its stock market rising again after its pullback, I am keeping my eye on this investment opportunity.

EWS’s largest sector holding is in financial services, accounting for 53%; the rest of its top five holdings are in industrials, 20.01%; telecommunications, 12.7%; consumer discretionary, 8.5%; and consumer staples, 5.1%. The fund’s top five corporate holdings are in Singapore Telecommunications, 11.7%; United Overseas Bank Ltd., 11.3%; DBS Group Holdings Ltd., 11.1%; Oversea-Chinese Banking Corporation Ltd., 11.1%; and Keppel Corp Ltd., 5.3%.

Despite a recent rough path for Singapore’s stock market, it appears to be a fairly safe haven among Asian markets, especially compared to countries in the region that are seeing heightened inflation. Singapore has avoided the inflation trap thus far, with a rate of just 1.9% for July 2013, according to Statistics Singapore. Indeed, Singapore’s inflation rate has averaged 2.8% from 1962 until 2013. By investing in Singapore through EWS, you can benefit from the market’s rise.

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