Markit launches suite of Singapore dollar-denominated bond indices

Jun 20th, 2013 | By | Category: Fixed Income

Markit, a supplier of financial information and indices, best known for its expertise in the fixed income space, has announced the launch of the Markit iBoxx SGD, a family of bond indices designed to track the performance of sovereign and corporate debt denominated in Singapore dollars (SGD).

Markit launches Singapore dollar-denominated corporate bond indices

Markit has introduced the iBoxx SGD index family.

The indices are the first to include comprehensive and detailed coverage of the SGD corporate bond market.

The launch comes at a time when Singapore’s positive economic outlook and high credit rating are attracting a growing investor base to its local debt markets.

The SGD corporate bond market has grown by 130% over the past ten years to SG$113 billion in 2012. Last year, new issuance reached SG$31 billion.

The index family currently includes 79 sub-indices covering sovereign, sub-sovereign and corporate debt issuers across 29 sectors and industries, with a combined total debt of SG$150 billion. Approximately 64% of the non-sovereign debt included in these indices carries investment grade ratings and 35% is not rated.

Armins Rusis, managing director and global co-head of information at Markit, said: “These new indices will aid price discovery in the fast-growing SGD bond market and provide investors with an independent reference tool to assess returns. It follows the addition of SGD bonds to our bond pricing service last year and highlights our commitment to provide innovative information and solutions for customers active in the Asia-Pacific region.”

Pricing of underlying constituents for the indices is provided by Markit’s in-house bond pricing service, which uses multiple observable price sources and was expanded last year to include SGD bonds.

Melvin Lee, senior vice-president at Fullerton Fund Management Company, an investment management firm headquartered in Singapore, said: “The new Markit iBoxx SGD index provides a useful reference for the SGD credit market, which had previously lacked a pure SGD corporate bond index. I am confident that this latest offering from Markit will be well received by SGD bond investors.”

As well as providing a reference benchmark for the SGD bond market, the indices could form the basis of index-linked investment products such as exchange-traded funds (ETFs) and structured products. Indeed, there’s been a growing interest in Singapore-linked products as investors have scoured the planet for so-called ‘safe havens’. With its healthy banking sector, solid balance sheet (the country is triple-A rated) and strong economy, Singapore’s currency and credit markets have received much attention.

Recognising the country’s appeal, ETF providers have rolled out a number of products to meet investors’ demands, including the recently launched CurrencyShares Singapore Dollar Trust (FXSG) from Guggenheim Investments, and the locally listed ABF Singapore Bond Index ETF (SBIF) from Nikko Asset Management and db X-trackers II Markit iBoxx ABF Singapore Government UCITS ETF (KV4) from Deutsche Asset & Wealth Management, the latter two of which, incidentally, are linked to sovereign bond indices compiled by Markit.

However, with no ETF offering dedicated exposure to SGD corporate bonds, there remains a gap in the market. The introduction of SGD corporate bond indices, therefore, could well be the catalyst for an eventual ETF launch, especially given Markit’s strong presence in the ETF space – the firm is one of the top two providers of indices to fixed income ETFs globally.

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