Friday, May 22, 2015

Twice the fees and around 14-44 times the spread - Is it any wonder ETFs are not popular in Singapore ?

This is an interesting article on Barron's that ETF fees across the world are declining in most asset classes.

The interesting thing is that Equity fees for ETF are declining.

On, the other hand, Commodity ETF and Currency ETF fees are slowly increasing.

However, if you are an APAC investor, the picture is different.

Fees are still declining, but, in reality, APAC investors pay around 2 times the fees for ETFs as in USA.

Chances are one would also have a larger spread.

In most European / USA ETFs, the spread is less than 0.02% especially for a liquid ETF like SPY.

However, in Singapore, you will see from this table below, the average bid ask spread is around 0.28% to 0.88%.

This is around 14 to 40 times the spread in USA for SPY.

STI ETF 3.49 0.01 0.29%
DBXT MSAsExJp US$ 39.36 0.13 0.33%
Nikko AM STI ETF 3.54 0.01 0.28%
Lyxor ChinaH US$ 19.93 0.15 0.75%
UETF SSE50China 3.1 0.02 0.65%
DBXT MSRussia US$ 2.28 0.01 0.44%
DBXT CSI300 US$ 13.58 0.12 0.88%

This could explain why investors in Singapore are still wary of ETFs.

On top of this, you have the old issues of synthetic vs physical ETF, the default of pricing ETF in USD, with few exceptions.

In case SGX ever wants to improve liquidity and volume, it is important for it to address these issues i.e. 

a) Fees
b) Spreads
c) Physical ETF
d) Pricing in SGD

Full Disclosure : I am long STI ETF, DBXT MSAsExJp, DBXT CSI.

Disclaimer :- 

I am not an investment professional.

I encourage you to do your own independent "due diligence" on any idea that I write about, because I could be and probably am wrong.

Nothing written here is an invitation to buy or sell any particular stock.

At most, I am handing out an educated guess as to what the markets may do.

The market will always find a new way to make a fool out of me (and maybe, even you!).

Even the best strategies of the past fail, sometimes spectacularly, when you least expect it.

I am not immune to that, so please understand that any past success of mine will probably be followed by failures

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