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1H2021 Review of Phillip SING Income ETF

By August 30, 2021 No Comments

1H2021 Review of Phillip SING Income ETF

Compared to the start of the year, Singapore’s business activities have visibly returned to higher levels as the vaccination rate continues to climb by the day. As of 22 August 2021, 78% of the population have completed the full regimen with either two doses of the vaccine or one dose for recovered individuals, giving hopes for earlier and more comprehensive reopening. Reflecting an improving operating landscape, Singapore equities also saw some revitalization following its worst slump in 2020.

Along with upward revisions of consensus earnings expectations, the Straits Times Index also posted a strong rebound of 11.8%  in the first half of 2021. On a broad basis, we have seen some of our predictions at the start of the year coming through reflationary trades owing to economic recovery and rotation to quality dividend income.

Table 1: Singapore Equities Performance

Source: Bloomberg; As of 30 June 2021

1H2021: Capitalisation-weighted Nikko AM Singapore STI ETF posted an NTR of 11.5% while SPDR STI ETF posted a performance of 11.6%, both underperformed the STI benchmark. Meanwhile, our Phillip SING Income ETF (“the Fund”) posted a return of 7.85% for the comparable period and  also underperformed its benchmark, Morningstar® Singapore Yield Focus IndexSM, in part due to higher cash allocation in the portfolio. Nonetheless, our Fund saw asset-under-management (“AUM”) growing 14.4% to $65.8 million in 1H2021.

For context, unlike capitalisation-weighted STI ETFs (just rank constituents by market capitalisation), Phillip SING Income ETF utilizes the quality income strategy as its Index – Morningstar® Singapore Yield Focus IndexSM – employs a three-factor metric screen for business quality, financial health and trailing 12-month dividend yield.

Table 2: Attribution Summary (by GICS)

^Gross Total Return refers to the Total Return before deduction of fees & expenses and assumes any dividends being reinvested.
Source: Bloomberg; For the period: 31/12/2020-30/06/2021

On a gross total return (“GTR”)-basis, the Fund returned 8.95% (excluding cash). (). By the Global Industry Classification Standard (“GICS”), the performance of the Fund’s allocation by industry was mostly positive lest for Communication Services (-0.39%) and Consumer Discretionary (-0.64%). Healthcare allocations posted the best showing (29.93%) followed by Financials (19.39%).

In juxtaposition to capitalisation-weighted Nikko AM Singapore STI ETF and SPDR STI ETF, Phillip SING Income ETF underperformed due to 1) lower allocations to Financials (41% vs 45%) and 2) performance drag due to higher allocations to Communication services (14% vs 5%).

Outlook in 2H2021

Compared to the start of the year, we are more upbeat about the Singapore equity market in 2H2021, despite Singapore equities’ strong showing in the first half of the year. Reiterating our three major investment themes mentioned at the start of 2021, we have seen most of the themes already playing out (highlighted).

  1. Recovery of Global Demand – Commodities, energy, transportation, manufacturing
  2. Rotation to Quality/ Dividend Income – REITs, finance
  3. Re-rating – REITs, real estate, F&B, travel, entertainment

Despite the more virulent delta variant strain of the Covid-19 causing another bout of heightened measures that began in April 2021, vaccination rates are reaching a significant milestone of around 80%. Hospitalisation and ICU treatments for Covid-19 patients were shown to be significantly lower for those who had been partially or fully vaccinated. This is a clear vindication for the government’s vaccine programme as well as the efficacy of the vaccines.

Chart 1: Local Cases in the Last 28 Days by Vaccination Status and Severity of Condition

Source: Ministry of Health; as of 1 Aug 2021.

We are finally seeing the light at the end of the tunnel. Based on the trajectory of vaccination rates, we believe more than 80% of the population will have completed the full vaccination regimen by end of the year. With that in mind, we expect greater economic momentum for the rest of 2021, leading us to believe that re-rating plays will continue to pan out.

Particularly, we are of the view that S-REITs which had underperformed the broader market in the first half of 2021, will likely see renewed investors interest when the government eases measures and return to phase 3 reopening again on 19 August 2021. Furthermore, the Ministry of Health also recently declared Covid-19 an endemic, the likelihood for imposing strict measures again would ebb, along with the nation’s climbing vaccination rate.

Meanwhile, local listed companies are also beginning to lift salary freezes or cuts implemented last year. Amongst them are several Temasek-linked companies with large market capitalization in the STI such as Singtel, SATS and ST Engineering. In addition, local banks stocks have rallied significantly with the central bank’s announcement that dividend caps are lifted for locally incorporated banks and finance companies based in Singapore. The confluence of recent developments should bode well for Singapore equities in the near term.

Changes in Portfolio Allocation

Chart 2: Phillip SING Income ETF – Portfolio Allocation

Source: Phillip Capital Management (“PCM”); as of end-June 2021.

In the latest portfolio rebalancing, Phillip SING Income ETF saw the following rotations:

  • Financials: 41.01% [+2.28%]
  • REIT: 14.79% [-7.54%]
  • Communication Services: 13.33% [-1.41%]
  • Industrial: 16.85% [+8.01%]
  • Consumer: 9.86% [+2.64%]
  • Others: 21% [-4.1%]
  • Cash: 95% [+0.13%]

Specifically, the Fund saw rotations out of “REIT” allocations [-7.54%], “Others” of [-4.1%] which mainly consists of the IT and healthcare industries, and “Communication Services” [-1.41%]. Following the rebalancing, the Fund increased its allocations mainly into “Industrial” due to increased allocation into Venture Corp at the start of the year, “Consumer” due to increased allocation into Genting Singapore, and “Financials” due to increased allocation into the banks.

Meanwhile, the counters removed from the Fund were Ho Bee Land, Keppel REIT, Raffles Medical Group and SPH REIT. New additions to the Fund were F&N, Frasers Centrepoint Trust, Prime US REIT, Keppel Infrastructure Trust, Keppel Pacific Oak US REIT.

Quality Dividend Income Cushioning Performance

For the period 1H2021, Phillip SING Income ETF announced a cash dividend of $0.015 per share at the end-June 2021. According to Bloomberg, based on the closing NAV price per share of $1.063 on 30 June 2021, the Fund’s trailing 12-month (“TTM”) dividend yield was about 3.76%, higher than SPDR STI ETF’s 3.11% and comparable to Nikko AM STI ETF’s 3.77% for the same period.

Table 3: Top 10 Holdings’ Metrics

Source: PCM; Bloomberg as of 30 July 2021



Important Information

This publication and the information herein is provided by Phillip Capital Management (S) Ltd (“PCM”) for general information only and does not constitute a recommendation, an offer to sell, or a solicitation of any offer to invest in the exchange-traded fund (“ETF”) mentioned herein. It does not have any regard to your specific investment objectives, financial situation and any of your particular needs. You should read the Prospectus and the accompanying Product Highlights Sheet (“PHS”) for important information of the ETF and obtain advice from a financial adviser (“FA”) before making a commitment to invest in the ETF. A copy of the Prospectus and PHS for the ETF are available from PCM or any of its Participating Dealers (“PDs”).

Investments are subject to investment risks including the possible loss of the principal amount invested. The value of the units and the income accruing to the units may fall or rise. Past performance is not necessarily indicative of the future or likely performance of the Products. There can be no assurance that investment objectives will be achieved. Any use of financial derivative instruments will be for hedging and/or for efficient portfolio management. PCM reserves the discretion to determine if currency exposure should be hedged actively, passively or not at all, in the best interest of the ETF. The regular dividend distributions, either out of income and/or capital, are not guaranteed and subject to PCM’s discretion. Past payout yields and payments do not represent future payout yields and payments. Such dividend distributions will reduce the available capital for reinvestment and may result in an immediate decrease in the net asset value (“NAV”) of the ETF. Upon launch of the ETF, please refer to <www.phillipfunds.com> for more information in relation to the dividend distributions.

An ETF is not like a typical unit trust as the units of the ETF (the “Units”) will be listed and traded like any share on the Singapore Exchange Securities Trading Limited (“SGX-ST”). Listing on the SGX-ST does not guarantee a liquid market for the Units which may be traded at prices above or below its NAV or may be suspended or delisted. Investors may buy or sell the Units on SGX-ST when it is listed. Investors cannot create or redeem Units directly with PCM and have no rights to request PCM to redeem or purchase their Units. Creation and redemption of Units are through PDs if investors are clients of the PDs, who have no obligation to agree to create or redeem Units on behalf of any investor and may impose terms and conditions in connection with such creation or redemption orders. Please refer to the Prospectus of the ETF for more details.

The information herein is not for any person in any jurisdiction or country where such distribution or availability for use would contravene any applicable law or regulation or would subject PCM to any registration or licensing requirement in such jurisdiction or country. The Products is not offered to U.S. Persons. PhillipCapital Group of Companies, including PCM, their affiliates and/or their officers, directors and/or employees may own or have positions in the ETF or related thereto.

Morningstar® Singapore Yield Focus IndexSM is a service mark of Morningstar Research Pte Ltd and its affiliated companies (collectively, “Morningstar”) and have been licensed for use for certain purposes by PCM. Phillip SING Income ETF is not sponsored, endorsed, sold or promoted by Morningstar, and Morningstar makes no representation regarding the advisability of investing in Phillip SING Income ETF.

This publication has not been reviewed by the Monetary Authority of Singapore.

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With effect from 1st July 2014, this FATCA Notice (the “Notice”) forms part of the terms and conditions of our products and services (the “Terms and Conditions”) governing your relationship (“you”, “your”, “yours” referred to herein include joint-account holders and beneficiary holders of an entity who are a natural person) with Phillip Capital Management (S) Ltd and its related corporations (collectively referred to herein as “PCM”, “us”, “we” or “our”) and should be read in conjunction with those Terms and Conditions, including those under our Personal Data Protection Notice.The existing terms and conditions of any contractual agreement entered into between PCM a nd you (the “Existing Terms and Conditions”) remain in full force and effect. In the event of any conflict or inconsistency between the provisions of this Notice and those of the Existing Terms and Conditions, the provisions of this Notice shall prevail.

We may from time to time update the Terms and Conditions listed here to ensure their consistency with our future developments,industry trends and/or any changes in legal or regulatory requirements. Such updates will be published at http://www.phillipfunds.com/ .

On March 18, 2010, the United States of America’s (“U.S.”) Hiring Incentives to Restore Employment Act of 2010 (Pub.L.111-147H.R.2847)) (the “Act”) was enacted into law. Section 501(a) of the Act added a new chapter 4 (sections 1471-1474) to Subtitle A of the U.S.’s Internal Revenue Code (Code).Chapter 4 expands the information reporting requirements imposed on foreign financial institutions (as defined in section 1471(d)(4)) (FFIs) with respect to certain U.S. accounts (as defined in section 1471(d)(1)) of specified U.S. person, and imposes withholding, documentation, and reporting requirements with respect to certain payments made to certain foreign entities.

PCM will be obliged to comply with the provisions of FATCA under the terms of the inter-governmental agreement (“IGA”) Model I between the U.S. and Singapore and under the terms of Singapore’s subsidiary legislation which will be issued pursuant to Singapore's Income Tax Act (Cap. 134) to implement the IGA. “FATCA” or “Foreign Account Tax Compliance Act” means Chapter 4 (sections 1471 to 1474) to Subtitle A of the U.S. Internal Revenue Code.

“FATCA” or “Foreign Account Tax Compliance Act” means Chapter 4 (sections 1471 to 1474) to Subtitle A of the U.S.Internal Revenue Code.

“U.S. person” means a U.S. citizen or resident individual, a partnership or corporation organised in the U.S. or under the laws of the U.S. or any state of the U.S. thereof, a trust if: (i) a court within the U.S.would have authority under the applicable law to render orders or judgments concerning substantially all issues regarding the administration of the trust; and (ii) one or more U.S. persons have the authority to control all substantial decisions of the trust, or an estate of a decedent that is a citizen or resident of the U.S..This definition shall be interpreted in accordance with the provisions of the U.S. Internal Revenue Code.

  • You shall provide all required documentation or information, including but not limited to your date of birth, countries of citizenship, countries of permanent residence, countries of tax residency and associated taxpayer identification numbers, which may be required to enable PCM to ascertain your U.S. tax status and share information and /or documents relating to you and/or your account(s) with domestic and international authorities for the purpose of complying with all the requirements of FATCA, the IGA between Singapore and U.S or other countries,any applicable Singapore or international laws or regulations.
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  • If investment accounts or products managed by PCM are beneficially owned by a U.S. Person or if PCM deemed you as a recalcitrant and/or a reportable person,PCM may compulsorily cancel your pending subscription order or capital injection,terminate the contractual relationship with you and withhold an amount for transferring to the relevant tax authorities as required under the FATCA, the IGA between Singapore and U.S or other countries, any applicable Singapore or international laws or regulations. PCM shall have no liability for losses,fees, costs, expense, damages, liabilities of any kind which you may have suffered in connection with such cancellation, termination, withholding amount and/or as a result of our complying with the requirements of FATCA, the IGA between Singapore and U.S or othercountries,any applicable Singapore or international laws or regulations,even if we make an incorrect assessment and decision.

PDPA

PERSONAL DATA PROTECTION NOTICE

With effect from 1st July 2014, this Personal Data Protection Notice (the “Notice”) forms part of the terms and conditions of our products and services (the “Terms and Conditions”) governing your relationship (“you”, “your”, “yours” referred to herein include joint-account holders and beneficiary holders of an entity who are a natural person) with Phillip Capital Management (S) Ltd and its related corporations (collectively referred to herein as “PCM”, “us”, “we” or “our”). Without prejudice to the existing terms and conditions of any contractual agreement entered into between PCM and you (the “Existing Terms and Conditions”), which remain in full force and effect, this Notice shall be read in conjunction with the Existing Terms and Conditions. In the event of any conflict or inconsistency between the provisions of this Notice and those of the Existing Terms and Conditions, the provisions of this Notice shall prevail.

We are required under the Personal Data Protection Act (“PDPA”) to put in place the necessary arrangements to protect personal data and comply with the PDPA. Personal data includes any data and information, whether true or not, about an individual (a natural person) who can be identified from that data or information, such as your name, NRIC, passport or other identification number, telephone numbers, address, email address and any other information relating to individuals which you or your authorized representative have provided to us or we are likely to have access to (“Personal Data”).

This Notice outlines the purposes for the collection, use and/or disclosure of your Personal Data by PCM, how we protect your Personal Data and your rights with respect to the collection, use and/or disclosure of your Personal Data. This Notice supplements but does not supersede nor replace any other consents which you may have previously provided to us in respect of your Personal Data, and your consents herein are additional to any rights which we may have at law to collect, use and/or disclose your Personal Data. We may from time to time update the Terms and Conditions listed here to ensure their consistency with our future developments, industry trends and/or any changes in legal or regulatory requirements. Such updates will be published at http://www.phillipfunds.com/.

1. PCM may collect, use and/or disclose your personal data for any of the following purposes listed below (collectively “Permitted Purposes”):-

i) carrying out activities, duties and obligations in connection with our products and services which you have applied for, including evaluating your eligibility and credit profile, verifying the identity or authority of your representatives, administration of your account and/or managing our overall relationship with you (including but not limited to the outsourcing of any of our functions to service providers or vendors, due diligence checks, accounting and portfolio valuation, billing and collections, business continuity and print management);

(ii) developing new services and/or products;

(iii) providing you with marketing, advertising and promotional information, materials and/or documents related to financial products and/or services that we may be selling, marketing, offering or promoting, whether such financial products or services exist now or are created in the future;

(iv) marketing and promotional events, including but not limited to images, photographs or videos of you during the events;

(v) meeting or complying with PCM’s internal policies and procedures and any applicable rules, law, regulations, codes of practice or guidelines, orders or requests issued by any court, legal or regulatory bodies (both national and international) (including but not limited to disclosures to regulatory authorities or financial industry self-regulatory bodies; conducting audit checks (internal/external), surveillance and investigation; handling of customer feedback or complaint; dispute resolutions; recording of telephone conversations and/or electronic communications with you; conducting checks or investigations for prevention and/or detection of financial crimes such as money-laundering, financing of terrorism, fraud and/or bribery etc.);

(vi) legal purposes, including but not limited to obtaining legal advice and enforcing or defending our legal and/or contractual rights against you;

(vii) risk management, statistical and trend analysis;

(viii) processing and/or storing data and/or information related to your relationship with PCM.

2. PCM, in order to facilitate the discharge of its duties and obligations to you, may be required to disclose your Personal Data for the Permitted Purposes and/or for processing of the Permitted Purposes on a need-to-know basis, to any of the following entities and the directors, officers, staff, employees and agents of any such entities, whether located within or outside Singapore (“Relevant Persons”):-

(i) any associate or related company of PCM and the directors, officers, staff, employees and agents of any such person;

(ii) any actual or proposed assignee or transferee of any of PCM’s rights and obligations or any actual or proposed delegate of any of PCM’s functions and duties under its contractual relationship with you;

(iii) any relevant governmental, supervisory or regulatory authority or court of law, including the Monetary Authority of Singapore, to which PCM is or may be subject;

(ix) any person in order to give effect to any instruction from you or any person acting or purporting to be acting on behalf of you;

(x) any person as PCM may consider necessary in order to comply with any order, directive or policy of any court or governmental or regulatory authority in any jurisdiction;

(xi) any person when required to do so in accordance with the laws of any applicable jurisdiction or rules of any professional self-regulatory bodies or securities exchanges;

(xii) any agent, contractor or third party service provider who provides their services in connection with the operation of PCM’s fund management business, including but not limited to the custodians, trustees, fund administrators, registrars, banks, legal firms, accounting and auditing firms, printing firms, IT service providers, credit reference agencies, credit bureaus, data screening entities for the purpose of due diligence checks and the prevention and detection of financial crimes.

3. PCM’s related companies and third party service providers shall be bound by the same provisions as set out in this Notice and we will require them to ensure that your Personal Data are kept confidential and secure.

4. You represent and warrant that your Personal Data provided to us is accurate and complete for us to make a decision that affects you or to disclose your Personal Data to the above-mentioned Relevant Persons on a need-to-know basis. Where applicable, when you provided Personal Data relating to another individual (e.g. your dependent, spouse, children and/or parents) to us, you represent and warrant that such Personal Data is accurate and complete and the consent of that individual has been obtained for the collection, use and disclosure of his/her Personal Data in accordance with the provisions listed in this Notice.

5. We will retain your Personal Data to the extent that one or more of the Purposes for which your Personal Data was collected, used and/or disclosed is/are still valid and for legal, regulatory reporting or regulatory investigations purposes for which retention may be necessary.

6. PCM may terminate any contractual relationship which you may have with us, if any information provided to us is insufficient, misleading or erroneous or if any information that is required to be disclosed to any regulatory authority for compliance with any law or regulation is not provided by you.

7. You may request access to or make corrections to your Personal Data records. Depending on the information requested PCM may charge a small fee when you request access to your Personal Data. Upon your request and subject to the provisions under the PDPA, PCM will respond accordingly within reasonably possible time. Please submit your request to our Data Protection Officer via pcm@phillip.com.sg.

8. You may withdraw your consent to any use or disclosure of your Personal Data for any or all of the Purposes as set out in this Notice by giving written notice to us. If you withdraw your consent(s), depending on the nature of your request, we may not be in a position to continue to provide our products or services to you or administer any contractual relationship in place. Such withdrawal may be considered a termination by you of any agreement you may have with us. Where there is any breach of your contractual obligations or undertakings, PCM’s legal rights and remedies are expressly reserved in such event.