SGX’s new ETFs offer Asia, global exposure, but broad baskets can hide risk

[SINGAPORE] A spread of new exchange-traded funds (ETFs) listed on the Singapore Exchange (SGX) offers convenient exposure to major Asian and global markets, but investors must keep fundamentals in mind and watch fees and currency risk, experts said.

On Thursday (Oct 22), iFast Xtrackers Ucits ETFs – tracking the MSCI Taiwan, Nikkei 225, MSCI Korea, and artificial intelligence and big data indices – were listed on SGX.

Other ETFs recently offered include four Xtrackers funds with a route to the S&P 500 and Nasdaq-100 as well as developed markets.

One China-focused issue – the CGS-ICBC-CFETS Belt and Road Bond Index ETF, which grants exposure to yuan-denominated bonds in the China interbank bond market – was also listed on Oct 15.

SGX’s ETF market has grown quickly in recent times, with assets totalling more than S$20 billion as at end-June and net inflows up 240 per cent year on year in the second half of fiscal 2026.

Most are eligible for Supplementary Retirement Scheme (SRS) investing, meaning those in Singapore with an SRS account can use their funds to buy these ETFs.

The funds also trade in Singapore dollars, offering easier access and familiarity for local investors, especially those seeking a wider Asia or global portfolio exposure.

Currency risk

But trading in a local currency does not eliminate currency risk, noted Jeremy Foo, country manager for Singapore at StashAway.

For funds’ investments priced mainly in foreign currencies such as US dollars, currency movements still affect returns in Singapore dollar terms.

As an example, he cited the iFast XBG ETF, which invests in the Irish-domiciled Xtrackers AI and Big Data Ucits ETF. Its total expense ratio for XBG is 0.63 per cent a year – nearly double the underlying ETF’s 0.35 per cent.

“On a S$10,000 investment, that difference could cost investors more than S$5,000 over 30 years, assuming a 7 per cent annual return before fees,” he said.

Trading costs could also be higher, he pointed out. The ETFs trade when US stock markets are closed, which could mean wider bid-ask spreads.

With the new SGX-listed Ucits ETFs specifically, investors are still exposed to the currencies of the underlying assets – predominantly the US dollar, said Charu Chanana, chief investment strategist at Saxo Bank Singapore.

Liquidity questions

At some point, investors should compare products across exchanges where some established Ucits ETFs may offer deeper liquidity and lower trading costs.

Ucits, which stands for Undertakings for Collective Investment in Transferable Securities, is a regulatory framework established by the European Union to govern funds in areas including diversification, liquidity and leverage.

For non-EU investors, Irish-domiciled Ucits ETFs in particular offer a lower US dividend withholding tax rate of 15 per cent, compared to 30 per cent for US-domiciled ETFs.

Various international exchanges including London offer Ucits ETFs, where certain funds have longer trading histories and tighter spreads.

Ultimately, what matters are the market fundamentals behind the funds, said Chanana.

StashAway’s Foo said the choice could come down to what investors value: the convenience of trading locally in Singapore dollars, or lower ongoing fees.

“Investors should compare the total cost of ownership – including trading spreads, brokerages, foreign exchange conversion and ongoing fund fees – beyond the trading currency of ETFs when choosing which funds to invest in,” said Chanana.

Asia-Pacific indices’ continued value

ETFs tracking major Asia indices have firm underlying fundamentals and could help investors diversify beyond the US in terms of tech and AI exposure, said analysts.

Gina Kim, portfolio manager for emerging market equities at Nordea Asset Management, noted that despite a rough third quarter for regional markets, underlying fundamentals behind newly listed ETFs tracking Asia indices remain “robust”.

Major sell-offs of technology and AI-linked plays dominated Asia markets in recent months, on top of South Korea’s leveraged bet woes in July.

This volatility across Asia-Pacific indices could have been “driven more by market sentiment than by any material deterioration in business conditions”, she said.

Data from StashAway shows the number of investors holding broader Taiwan and South Korea ETFs was up by 48 per cent and 19 per cent, respectively, quarter on quarter in Q3, with both asset classes seeing net inflows.

Semiconductors, a theme closely tied to the region, were the third-most popular asset class in Q3, selected by 24 per cent of investors, said Foo.

These market allocations can help investors who want to broaden their AI exposure beyond the US, he added.

Chanana, however, said investors must tread with caution.

Single-country and AI ETFs carry heavy concentration and volatility risks, and may be better placed as “satellite allocations” for those with longer investment horizons, she said.

This is particularly so for those considering allocating their retirement investments to ETFs, in lieu of their SRS eligibility – as retirement investing still needs to prioritise healthy diversification and “sensible” risk-taking.

She noted how the Singapore government’s planned introduction of low-cost, diversified life-cycle investment products in 2028 is “a step in that direction”.

Diversified global equity and bond funds may be generally better suited to forming the core of retirement portfolios.

The funds’ “SRS eligibility can attract investors initially, but the real test is whether these funds offer the right diversification and cost efficiency for retirement portfolios over decades, not just whether they are convenient to access today”, she said.