When it comes to the world of ETFs, Singapore is a bit of an outlier. While a few prominent players dominate other markets, Singapore’s ETF market is much more fragmented, with a large number of smaller players. It has led to a very different landscape in Singapore regarding ETFs.
What are ETFs?
ETFs are investment products that track an index, a commodity, or a basket of assets. Unlike traditional mutual funds, which a fund manager actively manages, ETFs follow the underlying asset(s) they track. This passive management style results in lower fees and a more tax-efficient product.
Why are ETFs so popular in Singapore?
Passive investment products
One key difference is that the rest of the world is dominated by passive investment products, while Singapore is more evenly split between passive and active products. It has been attributed to the fact that active products have done better in Singapore than in most other markets.
More innovation
Another interesting difference is that there has been much more innovation in Singapore’s ETF market than most other markets. For example, several products are unique to Singapore, such as the SGAM ETFs. These products have successfully attracted investors, and they account for a significant portion of the market.
Liquid ETF market
For one, Singapore has a very liquid ETF market. It means that many different ETFs are available and can be traded easily and quickly. In addition, the fees for trading ETFs are typically low, making it easy for investors to get in and out of positions quickly.
Range of ETFs available
Another distinguishing factor is the range of ETFs available in Singapore. In addition to traditional equity and bond ETFs, Singapore also has many thematic ETFs available. These ETFs invest in specific sectors or industries, such as healthcare or technology. It gives investors in Singapore a lot of flexibility when it comes to constructing their portfolios.
Regulatory environment
Singapore also has a very favourable regulatory environment for ETFs. The Monetary Authority of Singapore (MAS) supports ETFs and has created several regulations that make it easy for investors to invest in ETFs. It helps ensure that the ETF market remains healthy and continues to grow.
Why is Singapore’s ETF market so thriving?
Several factors come into play, including the markets liquidity, the range of available ETFs, and the favourable regulatory environment. These factors have helped Singapore become a world leader in ETF markets, and they are likely to continue to be a major draw for investors around the world.
What accounts for these differences?
Several factors are at play, but one key difference is the regulatory environment. Singapore has been much more supportive of ETFs than most other markets, which has helped to encourage innovation and growth.
How does the rest of the world compare to Singapore?
The rest of the world is still catching up to Singapore regarding ETF markets. In most countries, ETFs are still relatively new, and there is not much liquidity in the market. It is challenging to trade ETFs and have higher fees than in Singapore. Additionally, the rest of the world does not have the same favourable tax laws as Singapore, making ETFs a less attractive investment product.
Overall, Singapore’s ETF market is very different from the rest of the world, leading to exciting developments. If you’re interested in ETFs, it’s worth looking at what’s going on in Singapore!
Bottom line
ETFs are becoming increasingly popular worldwide, but Singapore is still leading the pack for this investment product (check this here). Singapore is the ideal place to invest in ETFs thanks to its well-developed financial market infrastructure, stable political and economic environment, and favourable tax laws. The rest of the world is still playing catch-up, but it is only a matter of time before other countries embrace this investment product.
