I would like to thank the anonymous person who pointed out to me that DBS will be issuing an ETF that will be tracking the Straits Times Index. The IPO of this ETF, which will be trading on SGX under the quote 'DBS STI ETF 100',will from the 12th of February to the noon of the 15th of February and subsequently, it will be available for trading on the SGX on the 25th of February. I took a quick glance at the brochure and the prospectus and I thought it will be useful to point out some of the differences between this ETF that DBS will be issuing and the STI ETF which is currently managed by StreetTracks.
1) DBS STI ETF 100 is different from the STI ETF. Although both are ETFs that will track the Straits Times Index, their managers and trustees are different. In short, there will be two ETFs that will track the Straits Times Index on SGX.
2) The board lot size of the DBS STI ETF 100 is 100 shares per lot and one share will be roughly 1/1000 of the level of the Straits Times Index. This means that one lot, which is the minimum purchase is only around a few hundred dollars. The latest closing level of the Straits Times Index is around 1700 so that means you only need to fork out $170 to buy one lot although brokerage charges can eat into your capital heavily. However, this will be good for those who have a limited capital and plan to do dollar cost averaging.
3) The total expense fee of the DBS STI ETF 100 is currently set at 0.28%. Of this 0.28%, 0.2% is the management fee while 0.08% is the trustee fee. In comparision, the STI ETF, which is being managed by StreetTracks has a total expense fee of 0.3%. The difference is rather small though at 0.02%.
4) For those who wish to save on the brokerage charge, you can apply for the IPO through POSB or DBS atm or through DBS Vickers and I believe you will only need to pay $2 for the application fee and that's all.
Overall, I would say that the DBS STI ETF 100 is slightly better than the STI ETF due to the small board lot size and the small difference in the expense fees. A note of caution though for those who are interested, i think it will probably be prudent to see if there is any liquidity issue with the DBS STI ETF 100 when it commences trading on SGX. Furthermore, I wonder how will the issue of the DBS STI ETF 100 affect the liquidity of the STI ETF since there are now two ETFs that will track the Straits Times Index.
The link for the DBS STI ETF 100 website can be found here.
Posts
Thanks for the info,
ReplyDeletegives me something to consider for the next few days.
Keep up the good work in your site.
Hi Kay, having looked through the info I have a question.
ReplyDeleteThe valuation frequency is stated as daily. So does that mean it is valued more like a unit-trust updated daily instead of STI ETF that is real time?
Regards,
DB10
Hi, thanks for the info.
ReplyDeleteJust wondering, if you can actually buy it from the ATM, how do u redeem it? and is the price directly deducted from our DBS/POSB accts? Also, are the dividends, if any, paid directly into the DBS/POSB accts, or you have to have a SGX/CDP acct to receive it.
Abit lost here.
Hi DB10,
ReplyDeleteThe valuation frequncy coudld be refering to the NAV of the underlying shares which the DBS ETF represents.This is calculated by DBS or trustee
The ETF is still traded continously like a normal share and is based on the market price as per the bid-ask prices.
There should not be much deviation of the NAV of the underlying shares and the ETF market traded price as any deviation will allow an arbitrage opportunity.
So in summary,
There are 3 prices which are inter-related.
1)STI index
2)NAV of the underlying shares
3) Traded price of the ETF on the exchange
All 3 should be near each other in terms of pricing.
Kay,
ReplyDeleteBesides the two small differences between the new DBS STI ETF 100 and the earlier STI ETF (by streetTRACKS), are there any other major differences? Does streetTRACKS STI ETF use a different basket of underlying securities with different weightages compared to DBS STI ETF 100?
As it is, the liquidity of ETFs is rather small compared to normal shares. So why is DBS trying to copy streetTRACKS, something that might further dilute the market for both products? Or does DBSAM feel that the ETF market will grow tremendously, enough to support many players?
Assume I plan to buy STI ETFs. Which of the two products should I put my money on? Or should I split my investment both ways? Tks.
Hi DB10,
ReplyDeleteThanks for your compliment. SGDividends has pretty much explained on this issue. To elaborate and to add on further, I think the valuation frequency which is done daily refers to the NAV of the DBS STI ETF 100. That means the NAV of the DBS STI ETF 100 will be computed daily and this is similar to unit trusts and the STI ETF. In fact, I believe the NAV for the STI ETF is only computed once daily at the end of the trading hours.
NAV is different from the trading price. NAV which stands for Net Asset Value, is the total net worth of the companies being held in the ETF whereas price is how much the market is willing to pay for them. I hope this helps.
Hi Anonymous,
ReplyDeleteI'm sorry that I'm not able to answer your questions as I'm not taking part in the IPO. You might want to contact DBS Asset Management to ask them. Do tell me about the answers to your questions if you know them. Thanks.
Hi VS Lingam,
ReplyDeleteI have not read the prospectus of the DBS STI ETF 100 yet. To my understanding, the basket of underlying securities should be similar to the STI ETF since both are tracking the Straits Times Index.
Honestly, I have been thinking about why DBSAM is trying to launch a similar product. In the US, there is actually more than one ETF that tracks the major US indices such as the Dow Jones Industrial Average and the S&P 500 but the US market is much bigger than the SG market so liquidity is not an issue. I do feel that the local ETF market will grow tremendously in the near future but as this point of time, it is still rather small. As such, perhaps DBSAM thinks there is a potential to earn revenue from ETFs so maybe that's why they are launching the DBS STI ETF 100 and they will be launching more ETFs soon.
On paper, the DBS STI ETF 100 is slightly better than the STI ETF. I would suggest that it would be prudent to wait and see if there is any liquidity issue with the DBS STI ETF 100. When the STI ETF was first launched, there was a problem with liquidity and due to this, the spread was rather significant.
The main issue here is liquidity. If the DBS STI ETF 100 turns out to be more liquid than the STI ETF, I will add DBS STI ETF 100 to any new position while still retaining my original position in the STI ETF. If the liquidity of the STI ETF suffers tremendously, I will exit my position in the STI ETF and transfer it to the DBS STI ETF 100.
Hi Anonymous,
ReplyDeleteFor redeeming, I guess you have to sell it on the stock exchange via the stock broker like you do for shares. Since it is like a share, dividends should be credited to your CDP acct too.
For the IPO, I would also think that funds would be deducted from bank acct like normal IPO.
Thanks
Hi Kay,
ReplyDeleteI have been aware of the STI ETF for a while but I rather invest in the Singapore Index Fund (a unit trust also tracking the Singapore Index) managed by the Singapore Consortium Pte Ltd as I am more concerned about the liquidity problem of ETF.
Yes I know that the sale charge is 2% plus a small annual management fee for the unit trust but this is quite the same as buying and selling share in the SGX, on top of that, I can easily redeem the unit trust with the fund house without worrying that there is no buyer for the ETF. I might be wrong. What is your comment?
Hi CSTan,
ReplyDeleteDon't worry. I think you are not missing out on anything. Some issues are not so clear cut so there is no right or wrong. It is a choice of choosing between liquidity, management fees and sales expense. Perhaps I am choosing to get a slighter better return by choosing to invest in an ETF than an index linked fund but the trade off is that I may face liquidity problem.
Kay
IPO Price of DBS STI ETF is $2.08. Am I right to say there is a link between ETF price to the STI Close price. Would like to know what date of STI close this is related to ?
ReplyDeleteHi,
ReplyDeleteI was wondering how was the IPO price of DBS STI ETF 100 at $2.08 arrived at?
Kay
The price is $1.62
ReplyDeletehttp://www.dbsam.com/stietf/Pages/fund_profile.aspx
Hi,
ReplyDeleteThanks for the information. I saw that on the fund profile page too.
Kay
You can actually buy STI ETF from street tracks at an odd lot of 100.
ReplyDeleteHi Edmond,
ReplyDeleteIt is true that you can buy STI ETF in odd lots. It is just that the odd lots or the unit share market is different from the main market thus there are likely to be less transactions. Furthermore, the spread will be higher as compared to the main market.
Kay
why is the price of the sti etf higher than that of DBS ETF? I thot they are pegged to STI index?
ReplyDeleteHi,
ReplyDeleteTheoretically, the price is supposed to be one out of a thousandth of the Straits Times Index. However, it may not be able to achieve in reality. I'm not sure of the reasons with regards to the DBS STI ETF 100 since I have not look at this ETF in detail but some reasons may include the portfolio of the DBS STI ETF 100 not in the exact same weightage as the Straits Times Index and inherent market conditions.
Kay
This comment has been removed by the author.
ReplyDeleteHi Kay
ReplyDeleteI have been comparing the weekly Friday close NAV of DBSETF and StreettracksETF and there is a consistent difference.
Assuming portfolio holdings and expenses are almost identical btw the two ETF, could the difference in NAV be mostly attributable to undistributed dividends?
Tks as always for the advice.
CTH
Hi CTH,
ReplyDeleteI took a look at the balance sheet of the STI ETF and it is possible that the difference in NAV can be due to the effects of dividends. However, I suspect that the main reason for the difference is due to the weightage of the different counters in the portfolio for the DBS STI ETF 100 and the STI ETF instead. I have not seen the exact weightage for the individual counters in the portfolios yet so perhaps I will do this over the weekend.
Kay
Hi Kay
ReplyDeleteAny idea will there be a market for DBS STI 100? I look at the volume and see that it is traded thinly as compared to STI ETF. What is your opinion as at current? Or are we too early to judge?
Hi Walter,
ReplyDeleteThe liquidity for the DBS STI ETF 100 is rather poor as compared to the STI ETF. It may get better in the future as the market volume on SGX picks up. Right now, the market volume is still rather low compared to the previous peak of the stock market.
Kay
Hi
ReplyDeleteI am disappointed with liquidity of dbs etf. The bid ask spread is also high as a result (normally it is at least 2 points) whereas sti etf is only spread apart by 1 point.
It is such a pity as it would have been a good dollar averagin tool due to its small lot size.
Hi Singlish,
ReplyDeleteI'm also quite disappointed with the liquidity of the DBS STI ETF 100. But it is expected since the general awareness of ETFs in Singapore is not that high among investors. Moreover, DBS STI ETF 100 is competing with the STI ETF thus this will also affect its liquidity.
Kay
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ReplyDelete