SGX launches smart beta Asia-ex-Japan index

Apr 10th, 2017 | By | Category: Equities

Singapore Exchange (SGX) has launched the SGX Developed Asia ex Japan Quality Index, the first smart beta index created by the exchange’s indexing arm SGX Index Edge.

SGX launches smart beta Asia-ex-Japan index

The alternatively weighted index tracks quality stocks listed in developed markets within Asia excluding Japan.

According to SGX, the index, which may be used to benchmark fund performance or to underlie investment products such as ETFs, was created in response to investor demand for alternative strategies such as risk-factor indexing.

Ng Kin Yee, head of market data and connectivity at SGX, commented: “We are pleased to launch our first smart beta index as we build our offering and tap into growing demand for such products. Amid an uncertain economic climate, investors are looking towards alternative index strategies in a hunt for better and more sustainable returns. SGX Index Edge has yet again demonstrated an innovative and solutions-driven approach to index design in Asia, while enforcing a discipline in index governance and oversight.”

The index moves beyond a traditional capitalisation-weighted approach to enhance exposure to the quality factor within developed markets in Asia excluding Japan. It uses a bottom-up constituent selection approach, harnessing data sourced from Standard & Poors. Risk-factor indexing, a framework that forms a key aspect of smart beta and an increasingly prevalent alternative strategy, is employed together with quality factors such as profitability, accrual and leverage ratios.

The index contains 60 constituents in total derived from three countries – Hong Kong, Korea and Singapore with approximately an equal weighting to each country. The largest sector exposures are to consumer discretionary and information technology with roughly a fifth weighting each, followed by industrials and financials with between 15%-18% each. The largest constituents are Samsung (6.5%), Hong Kong Exchange (5.3%), Overseas Chinese Banking (5.2%) and Keppel (5.0%).

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