ETFs tracking foreign markets beat domestic focused ETF

by S BIRRUNTHA / pic by MUHD AMIN NAHARUL

LOCAL exchange-traded funds (ETFs) that track foreign markets, generated strong returns in the past three months as markets like the US and China edged higher in the period.

As of Oct 30, 2020, the three best performing ETFs tracking foreign markets on Bursa Malaysia were TradePlus NYSE FANG+ Daily (2x) Leveraged Tracker, MyETF Dow Jones US Titans 50 and TradePlus S&P New China Tracker.

Data from Bursa Malaysia showed the TradePlus NYSE FANG+ Daily (2x) Leveraged Tracker topped the list by making a 100% total return in the past three months.

The ETF is a futures-based ETF designed to provide investors a two times (2x) leveraged exposure to the NYSE FANG+ Index, that consists of some of the largest global technology players.

As of yesterday, the ETF closed 6.21% lower to RM9.22, giving it a market capitalisation of RM1.54 billion.

The MyETF Dow Jones US Titans 50 ETF made 35.45% in return in the same period and it tracks the performance of the 50 largest Shariah-compliant companies (by float-adjusted market capitalisation) listed in the US.

MyETF Dow Jones US Titans 50 ETF closed 3.57% higher at RM1.59 yesterday, giving it a market capitalisation of RM7.36 million.

The TradePlus S&P New China Tracker ETF made 27.58% return in the past three months from its investment in equities that focus on China’s new economy.

This ETF focuses on customer-centric companies of China’s new economy, rather than manufacturing companies or banking corporations.

The fund gives traders exposure to globally-recognised companies such as Alibaba Group Holding Ltd, Tencent Holdings Ltd, JD.Com Inc and Pinduoduo Inc that have been resilient despite the economic impacts of Covid-19.

The fund also offers the flexibility to trade in US dollar or ringgit, and holds the distinction of being Malaysia’s only dual-currency ETF listed on Bursa Malaysia.

At close yesterday, the fund was 1.57% higher at RM8.13 with a market capitalisation of RM15.7 million.

Domestic-based ETF like MyETF Dow Jones Islamic Market Malaysia Titan 25 generated 20.45% return in the past three months.

The ETF is designed to measure the largest and the most liquid Malaysia-domiciled companies that comply with Islamic investment guidelines.

As of yesterday, the ETF closed higher at RM1.34, giving it a market capitalisation of RM345.05 million.

It was followed by the MyETF MSCI Malaysia Islamic Dividend ETF which made 12.45% returns in the past three months.

The fund attempts to achieve an absolute value of tracking error of less than 3% between the net asset value of the fund and the benchmark index.

The benchmark index may consist between 16 to 30 Shariah-compliant companies listed on Bursa Securities with higher than average dividend yield that are deemed both sustainable and persistent by MSCI.

As of close yesterday, MyETF MSCI Malaysia Islamic Dividend was 4.35% higher at RM1.44, giving it a market valuation of RM43.78 million.

The FTSE Bursa Malaysia KLCI (FBM KLCI) ETF, meanwhile, made a 11.67% return in the past three months, tracking the country’s top 30 listed companies by market capitalisation.

The ETF closed 1.8% higher at RM1.66 yesterday giving it a market capitalisation of RM4.16 million.

In the same period, the MyETF MSCI South-East Asia Islamic Dividend ETF gained 8.94% in returns, while the Principal FTSE China 50 ETF rose 3.95% followed by the TradePlus Shariah Gold Tracker which made total returns of 2.88% and ABF Malaysia Bond Index Fund, 1.98%.

Four other ETFs, namely Principal FTSE ASEAN 40 Malaysia ETF, TradePlus HSCEI Daily (2x) Leveraged Tracker, TradePlus HSCEI Daily (-1x) Inverse Tracker and TradePlus NYSE FANG+ Daily (-1x) Inverse Tracker posted return of -0.79%, -8.39%, -10.7% and -28.78% respectively, in the past three months.

The ETF market in Malaysia remains small. From 2005 up to 2018, there were only 10 ETF listings in Malaysia, but the number has nearly doubled with nine new ETFs coming on board since 2019.

Five ETFs were listed in 2019, of which four debuted in November last year under Affin Hwang Asset Management (AM) Bhd.

In January this year, Kenanga Investors Bhd had listed two leveraged and inverse funds.

Later, Affin Hwang AM launched two equity ETFs in July 2020, bringing its total ETFs under management to eight.