iShares J.P. Morgan Asia Credit Bond Index SGD ETF

Risk Classification: 4 – Aggressive

Price per Unit (29 Mar 16): 14.42 [SGD]

Dividend Yield: 4.28%

Expense Ratio: 0.32%

Please refer prospectus for detailed risk disclosure

Investment Rationale:

This ETF broadly invests in Asian credit medium to long term instruments across high grade and high yield. Since the fund invests into longer tenor securities and lower credit risk instruments, it’s performance can be more volatile than funds investing in shorter tenor and higher credit risk instruments.

Asia as a region has robust fundamentals with positive long term economic growth prospects with favorable demographics, strong sovereign balance sheets, high personal savings rates and trade competitive advantages. At the same time, Asia as a region needs capital for investment into infrastructure and capital spending. This creates a favorable market for Asian issuers to raise capital and we have seen good returns from this asset class. Although we see near-term headwinds from China due to rapid debt build-up in the corporate sector, overall we feel that this is not enough to cause a systemic risk event. Valuations are attractive.

Below Chart Shows the Asian Credit Spread Index:

asian credit spreads

Fundamental Risk to investment:

This ETF will sharply sell off in the event of a sharp widening in credit spreads in Asian credit and/or a sharp sell-off in medium to long term US Treasuries. We don’t expect a steep sell-off in Asian credit spreads despite slowdown in China as overall balance sheet including sovereign and consumer sectors looks fine and underlying fundamentals remain intact. At the same time, we don’t expect a sharp sell-off in US treasuries due to our overall bearish outlook for riskier assets and high yield differential with other G3 sovereign markets.

Details of ETF:

Details on iShares website [for the USD version] – For Live data and Prospectus

AJACS SP DESAJACS SP COMP