A new thematic approach for Asian investors

APAC News Asian Investors can track markets through themeatic funds like iEdge FactSheet

Share investors who are looking beyond fundamental and technical analysis have other options to track global stocks

25 October 2019 | Staff Writers

In an increasingly global world, listed companies are exposed to a myriad of external factors from currency movements, to fluctuating trade policies, market disruptors and rapidly changing market trends. Many companies, particularly in the services sector, can be influenced by developments well beyond their shores.

So how does an investor assess the fundamentals of stocks in industries undergoing constant and rapid change. Moreover, in share markets like Australia, where there tends to be a small handful of listed companies dominated industry sectors, is there a better benchmark than existing sub-indices?

The Singapore Exchange (SGX) thinks there is, which led to its creation of a series of niche global indices with a heavy focus on Asian economies. The exchange has teamed with US financial data software company FactSet Research Systems, creating a series of “virtual indices” called the iEdge-FactSet Thematic Indices.

Pan-Asian tech sector focus

In all there are twelve sector indices in healthcare, online, IT, robotics, and cybersecurity, SGX describes them as, “seek(ing) to identify and capture the opportunities created by structural social, economic or demographic trends and their long-term secular influences on the world’s markets and economies. These indices track the second- and third-order effects of structural trends that create hot spots of investment opportunities where significant amounts of capital could be concentrated.”

Six of its indices are globally-based, five are pan-Asian; only one index “China Internet” is country specific. Simon Karaban, Head of Index Services at SGX, says, “There is an increasing allocation of global assets to thematic-based investing and we are proud to be at the forefront of developing innovative and respected index-based solutions for our product partners.

The iEdge-FactSet series of thematic indices offer flexibility and choice for investors who can better express their view on a range of emerging trends across global markets.”

The comments come along with the announcement the exchange is licensing its iEdge-FactSet Global Internet Index to Nikko Asset Management (Nikko AM). Nikko AM, one of Asia’s largest asset managers, will adopt the index for exchange-traded fund (ETF) listing.

The Global Internet Index traces the performance of developed market securities primarily in Internet and Data Services, General Internet and Online Services, Internet Support Services, Financial Software and Services, Virtual Reality and Engineering Software business segments and Online Retail.

Eleanor Seet, Head of Asia ex-Japan at Nikko Asset Management, says, “This is Nikko AM’s first ETF offering in Hong Kong, and we are pleased to have the partnership of SGX through the iEdge-FactSet Global Internet Index. The Nikko AM Global Internet ETF provides investors with easy and low-cost access to the world’s internet titans, across trending themes such as e-commerce, internet of things, social networking, cloud services and e-gaming.

China’s Belt and Road Initiative also becoming a thematic investment class

They are certainly not alone in the thematic investment space. French Asset Management company, Amundi has targeted China’s ‘New Silk Road’ theme seeking to identify, and invest, in companies which derive substantial revenues in markets and have significant business that benefits from the development of the new silk roads across Asia, Europe, the Middle East and Africa.

The new strategy, announced earlier this week, will not only focus purely on investments with direct exposure to Belt and Road Initiative (BRI) projects but also secondary industries that will reap financial rewards. Amundi, which has US$50 billion invested in emerging market equities, says its aim is to have a high-conviction portfolio of 60 to 90 names, the French asset manager said in a note.