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Trading in ETF

As it is traded in USD. Will it be risky as USD is likely to be weak in coming future?

 

Soft commodities are an attractive area to invest in the long term.



French investment firm Lyxor Asset Management launched a commodity exchange-traded fund (ETF) in Singapore on Tuesday, and aims to double the number of ETF issues in the country in the next three months.



Lyxor, a unit of French banking group Societe Generale , launched the Lyxor ETF Commodities CRB based on the Reuters/Jefferies CRB Index which tracks 19 commodity futures contracts including those based on oil, metals, cotton, coffee, grains, and frozen concentrated orange juice.



"The ETF phase is catching on," said Sandra Lee, managing director at Societe Generale's corporate and investment banking arm for Asia ex-Japan, citing ETF's cost efficiency and ease of trading for investors.



The new ETF debuts on Jan. 18 and would be the 14th ETF to be listed in Singapore. Lyxor -- which would have four ETFs listed in Singapore after the latest launch -- also wants to issue ETFs in Hong Kong, Taiwan, and South Korea, Lee said.



Bought and sold through brokers, ETFs provide cheaper alternatives to traditional unit trusts as investors do not have to pay front-end charges, and their growing popularity has put pressure on banks to cut sales charges for traditional funds.



"People buy funds because they want performance, and performance can be affected by fees, so ETFs definitely have the advantage," Lee said.



One of the fastest-growing investment products in the U.S., ETFs allow investors to get exposure to a region or sector without having to own the underlying index components.



Investors would be charged an annual management fee of 0.35%, but no sales or front-end fee to invest in the Lyxor ETF, whereas unit trusts typically have a sales fee of 3-5% and annual management fee of 1-2%, Lyxor said. Some fund managers said the industry would face pressure on fees as ETFs take off in Asia.



"Fees would have to come down in the long run, and active managers would have to justify their living," said Peter Chiang, a senior fund manager at DBS Asset Management. "Deliver your alphas or be dead."



Seck Wai Kwong, senior executive vice-president at Singapore Exchange , said Singapore wants to offer ETFs based on interest rates, currencies, and real estate as well.



The Lyxor ETF Commodities CRB would be the second commodity ETF listed in Singapore, after the streetTRACKS Gold Shares which debuted in October last year.



Commodities are becoming a mainstream asset class as pension and institutional funds have poured money into this sector to take advantage of surging metal and energy prices.



However, commodity prices have had a rough start to the year on panic selling by short-term traders, and as crude oil prices plunged to their lowest in nearly 19 months on Jan. 11. The CRB index has slid about 20% since hitting a record high on May 11, 2006.



Lyxor competes with Barclays Global Investors -- part of Barclays Plc. -- and State Street Global Advisors in setting up ETFs. Barclays is the world's top ETF manager, with about 49% of the market share, according to a Morgan Stanley research note.



Total assets managed under ETFs globally are expected to balloon to more than US$2 trillion in 2011, from US$504.5 billion at the end of September last year, Morgan Stanley said.

 

Ways to trade overseas ETFs


1) Through Singapore stockbrokers.



2) Use US brokers such as ETrade and TD Ameritrade. To trade, you must deposit some money in the accounts. The commission for each trade for TD Ameritrade is a flat US$9.95, one of the cheapest around.



3) www.optionsexpress.com.sg (foreign-based broker)



If you want exposure to nuclear energy, for example, you can try one of these ways.

 

ETFs provides diversification.



ETFs simply track the performance of a specific stock market or bond market index or another benchmark such as the price of gold or commodities.



Unit trusts, on the other hand, are managed by managers who buy and sell as they choose.



The management fees or expense ratios of ETFs are way below those of UTs.



The commission for buying or selling UTs are also way below those of UTs.



The trading price of an ETF is transparent, just like stocks. By contrast, you don't know what price you buy or sell UTs at until at least a day later, as they are priced only once - usually, at the at the end of trading each day.

 

Hi august,

I believe you can only use cash for UOB Gold & Gen Fund. Maybe you can use CPF gold limit for gold savings account and CPF stock limit for gold ETF. More info on gold here.

 

Sorry about my ignorant, am trying to learn. Where else can I find the price of Gold in yahoo or Msn ? tried searching for them in vain. Thanks,

 

Thanks Nostradamus, one other question. I am currently invested in Gold unit trust from UOB. Prices have dropped this few weeks . I still believe in the fact that Gold price will move north. My question is,.. in your opinion. would you think investing in UT for Gold is better or the ETF Gold fund ? Your comment's greatly appreciated

 

Hi august,

Vol is low. Only 5,310 shares. Stock quote is GLD 10US$. You can see the price at http://www.sgx.com/psv/securities/etf/ETF_CPM_RegionIntl_Prices.asp.

 

Hi YongJiu,



For the gold ETF here, it's during our trading hours. Agree you can't catch the price during US hours. But it's the same with stocks. Some positive or negative news may be out after trading ours. The next day, there's a gap up or down in price.



But it's still better than UT, where you can only catch closing price. Sometimes, gold prices can plunge 3% a day. Catching intraday price will not be so bad.

 

Hi, I am interested in trading in this Gold ETF , but am not able to locate it in the top vol today. What is it called ? Thanks for your guidance

 

Hi Nos,

The commodity ETF like Gold are usually traded around the globe and more or less 24 hours. Whatever price action happens in US will be reflected immediately on the next day opening quote of the gold ETF in SGX. Hence, most of the price action only happens in US.

Do not think you can really catch the intra day low or high by trading commodity like Gold ETF in SGX?

 

Lyxor Asset Management, a unit of French banking group Societe Generale , said it would list 2 exchange-traded funds on the Singapore Exchange on October 19 to track Asian shares. The listings would be the French asset management company's first ETF listings in Asia, Isabelle Bourcier, global coordinator of Lyxor, told a news conference.



The first ETF would track the Morgan Stanley Capital International Asia-Pacific, excluding Japan, index which represents 667 Asian companies in 13 stock exchanges. The second ETF would track the Hang Seng China Enterprise Index, which includes the 37 biggest Chinese companies listed on the Hong Kong Exchange with H-share status. Bourcier said the two funds would start with seed money of $50m each.



Thomas Key, senior vice president at the Singapore Exchange, said recently launched exchange traded funds are generating strong volumes.



The iShares MSCI India, which tracks the MSCI Index, has seen an average volume of $1m a day since it was launched three months ago, he said. Listed ETFs, which trade like individual stocks, can give investors exposure to a whole market or sector, without the holder having to own the underlying assets.

 

You can also perform hedging. ETFs can be used to hedge against other investment positions. For instance, an investor may long a specific market segment while at the same time shorting an ETF.

 

Hi chipchip66,



I've checked streetTRACKS STI ETF, it allows 100% CPF-OA. Other ETFs may be different.

 

Exchange Traded Funds (ETFs) are open-ended investment funds listed and traded intraday on a stock exchange. They aim to track the performance of an index and provide access to a wide variety of markets and asset classes. ETFs combine the best of shares and unit trusts.

Exchange-traded funds offer the following advantages:

• Efficiency: No sales charge. Annual management fees for ETFs are generally less than 1%, enabling investors to obtain cost-efficient exposure to a diversified portfolio of securities through a single transaction.
  
• Transparency: Investors have ready access to the component securities represented in an ETF. Moreover, market prices are published real-time throughout the trading day.
  
• Flexibility: An investor can buy and sell ETFs anytime during trading hours and may employ the traditional trading techniques including stop orders, limit orders, margin purchases, and short sales.

 

ok tks! will check with them. cheers!

 

If it's unit trust (UT), you can use 100%. Since ETFs trade like stocks, I think it's the stock limit. Better confirm with your agent bank.

 

Hi forumers, does anybody know how many % can we use our CPF-OA a/c to trade? IF i have 40k in OA and my stock limit is 5K, can i use up to 40k or 5k? Tks