Singapore is well known in the investment community for its trade. The country is the 14th largest exporter and 15th largest importer in the world, with the highest trade-to-gross domestic product (GDP) ratio in the world at more than 400%, as of October 2012. It's also the fourth largest financial center and foreign exchange trading center in the world.
The country's success in global trade is largely due to its location and the fact that it has very little corruption, a skilled workforce, low tax rates, and advanced infrastructure.
These attributes have attracted about 7,000 multinational corporations from the U.S., E.U. and Japan as well as an additional 3,000 companies from India and China.
The easiest way to invest in Singapore is with exchange-traded funds (ETFs), which offer diversified exposure to the country in a single U.S.-traded security. The most popular ETF to invest in Singapore is the iShares MSCI Singapore Index Fund (EWS), which has a net asset value of more than $1.5 billion and holds more than 30 different securities, as of October 2012.
Since Singapore is primarily a trade destination, the ETF is heavily weighted towards financial (47.14%) and industrial (26.29%) companies. Investors should be aware that this overweight position could result in added risk if, for example, the financial system were strained.
The three largest holdings include:
Investors looking to invest in smaller companies in Singapore can also consider the iShares MSCI Singapore Small Cap Index (EWSS).
However, with only $3.38 million in assets and volume of just 1,500 shares per day, as of October 2012, investors should consider the added liquidity risk.
Finally, investors can purchase The Singapore Fund Inc. (SGF), which is a closed-end mutual fund with a market capitalization of nearly $140 million, as of October 2012. Unlike ETFs, closed-end funds can trade at a premium or discount to their net asset value, while this fund also invests in other ASEAN Group countries, like Cambodia, Indonesia and Malaysia.
Singapore has one of the world's richest populations, very favorable demographics and a growing economy, but investors should be aware that its focus on trade leads to some level of economic dependence on global foreign trade.
Benefits of investing in Singapore include:
Risks of investing in Singapore include:
The country's success in global trade is largely due to its location and the fact that it has very little corruption, a skilled workforce, low tax rates, and advanced infrastructure.
These attributes have attracted about 7,000 multinational corporations from the U.S., E.U. and Japan as well as an additional 3,000 companies from India and China.
Investing in Singapore with ETFs
The easiest way to invest in Singapore is with exchange-traded funds (ETFs), which offer diversified exposure to the country in a single U.S.-traded security. The most popular ETF to invest in Singapore is the iShares MSCI Singapore Index Fund (EWS), which has a net asset value of more than $1.5 billion and holds more than 30 different securities, as of October 2012.
Since Singapore is primarily a trade destination, the ETF is heavily weighted towards financial (47.14%) and industrial (26.29%) companies. Investors should be aware that this overweight position could result in added risk if, for example, the financial system were strained.
The three largest holdings include:
- Singapore Telecom Ltd. (10.57%)
- DBS Group Holdings Ltd. (10.3%)
- United Overseas Bank Ltd. (9.93%)
Investors looking to invest in smaller companies in Singapore can also consider the iShares MSCI Singapore Small Cap Index (EWSS).
However, with only $3.38 million in assets and volume of just 1,500 shares per day, as of October 2012, investors should consider the added liquidity risk.
Finally, investors can purchase The Singapore Fund Inc. (SGF), which is a closed-end mutual fund with a market capitalization of nearly $140 million, as of October 2012. Unlike ETFs, closed-end funds can trade at a premium or discount to their net asset value, while this fund also invests in other ASEAN Group countries, like Cambodia, Indonesia and Malaysia.
Benefits & Risks of Investing in Singapore
Singapore has one of the world's richest populations, very favorable demographics and a growing economy, but investors should be aware that its focus on trade leads to some level of economic dependence on global foreign trade.
Benefits of investing in Singapore include:
- Favorable Demographics. Singapore has the third highest income per capita in the world, the largest concentration of millionaires, and one of the lowest unemployment rates among developed countries.
- Free, Open Economy. Singapore is widely considered to be one of the easiest countries in the world in which to conduct business, with very favorable tax rates, low corruption, a skilled workforce and advanced infrastructure.
Risks of investing in Singapore include:
- Reliance on Foreign Trade. Singapore's economy is heavily dependent on foreign trade, which led to a contraction during the 2001 bubble and 2008 financial crisis, but the country was quick to rebound, growing 14.5% by 2010.
Key Points to Remember
- Singapore is best known in the investment community for its participation in global trade as one of Asia's largest trading hubs.
- The easiest way to invest in Singapore is through ETFs or closed-end mutual funds, including the iShares MSCI Singapore Capped Index Fund (EWS).
- Singapore has a very robust and successful economy driven by strong fundamentals, but it is susceptible to slowdowns in global trade.
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