Managing risk in uncertain times
A stronger Singapore dollar in a new era of higher risks
Investors in the ABF Singapore Bond Index Fund and the Nikko AM SGD Investment Grade Corporate Bond ETF can potentially benefit from holding Singapore dollar-denominated bonds indirectly, given the tendency of the local dollar to appreciate against other currencies regional over time.
Over the past 10 years, the Singapore dollar has appreciated 4% annually against regional currencies such as the Indonesian rupiah, Malaysian ringgit and Thai baht.ten.
Going forward, the Singapore dollar is expected to strengthen further following the recent decision by the Monetary Authority of Singapore to contain inflation by increasing the rate of appreciation of the local dollar against a basket of other currencies.11.
Bonds are an essential part of any investment portfolio because they provide greater certainty of income in the form of regular interest payments. Credit risks are also lower since bond issuers are legally required to repay debt when due.
As the world enters a new era of higher inflation and heightened geopolitical uncertainties, investors may want to focus more on risk management and look to more balanced portfolios that include higher quality bonds.
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1 All information comes from Moody’s Investor Service data on issuer-weighted corporate default rates by rating, average from 1920 to 2021.
3, 5 Fund holdings are as of March 31, 2022. Source: Nikko AM Asia.
4, 6 Source: Nikko AM Asia, as of March 31, 2022. Returns are calculated on a NAV-NAV basis and assuming all dividends and distributions are reinvested, where applicable. Past actions do not necessarily define future actions.
seven Cash is included in the calculation of the average credit rating and is rated AAA regardless of currencies held. Credit ratings of the underlying fixed income securities are determined by S&P or Moody’s, and where official credit ratings are not available, Nikko AM Asia’s internal credit ratings are used.
8 The weighted average yield to maturity (%) is an average annual yield calculated by weighting the yield of each bond currently held by the Fund at the time of the calculation with capitalization and duration, and the yield of a bond is the interest rate used to yield all future obligations. cash flow from the bond to its present value. The figure is for illustrative purposes only and may vary from time to time due to market conditions and does not represent the fund’s distribution yield or actual rate of return.
9 The weighted average duration (years) is a capitalization-weighted average duration, and the figure is provided for illustrative purposes only and may vary from time to time due to market conditions.
ten Bloomberg data as of April 12, 2022
The price performance of the ETF on the Singapore Exchange Securities Trading Limited (“SGX-ST”) may differ from the net asset value per unit of the ETF. The ETF may also be suspended or delisted from the SGX-ST. The listing of the Units does not guarantee a liquid market for the Units. Investors should note that the ETF differs from a typical mutual fund and that units can only be created or redeemed directly by a participating large share creation or redemption broker.
The interest rate on the ordinary account of the Central Provident Fund is the legal minimum of 2.5% per annum, or the three-month average of the interest rates of the main local banks, whichever is higher. interest, revised quarterly. The interest rate on the special account is currently 4% per annum or the 12-month average yield of 10-year Singapore government securities plus 1%, whichever is greater, reviewed quarterly. Only sums exceeding $20,000 in OA and $40,000 in SA can be invested under the CPF investment program. Please see the CPF Board of Directors website for more information. Investors should note that the interest rates applicable to CPF accounts and the terms of CPFIS may be amended from time to time by the CPF Board.
This advertisement is for informational purposes only, without taking into account the specific investment objective, financial situation and special needs of any specific person. It should not be considered financial advice. All securities mentioned here are for illustrative purposes only and should not be interpreted as an investment recommendation. You should seek advice from a financial adviser before making any investment. If you choose not to, you should consider whether the selected investment is right for you. Investments in Funds are not deposits of, obligations of, or guaranteed or insured by Nikko Asset Management Asia Limited (“Nikko AM Asia”).
Past performance or any prediction, projection or forecast is not indicative of future performance. The Fund or any underlying fund may use or invest in financial derivative instruments. The value of shares and the income from them may go down as well as up. Investments in the Fund are subject to investment risks, including possible loss of principal invested. Before deciding whether to invest in the Fund.
The information contained herein may not be copied, reproduced or redistributed without the express consent of Nikko AM Asia. While reasonable care has been taken to ensure the information is accurate as of the date of publication, Nikko AM Asia makes no warranties or representations, express or implied, and expressly disclaims liability for any errors or omissions. Information may be subject to change without notice. Nikko AM Asia accepts no liability for any loss, incidental or consequential damages, arising from the use of or reliance on this document. This advertisement has not been reviewed by the Monetary Authority of Singapore.
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