As investors grow savvier, more Malaysians are open to trying out new investment vehicles to grow their portfolios. “Traditional” and popular forms of investment opportunities such as properties and unit trusts are making way for new products that aim to offer flexibility, control, and exposure.
While not a new form of investment, Exchange-Traded Funds or ETFs have been growing in popularity thanks to its growing reputation among investors for being conveniently tradable and having relatively lower management fees compared to mutual funds. ETFs have been around since 2005 in Bursa Malaysia, but many investors may not be aware as there are currently 19 ETFs listed in Bursa Malaysia. The ETFs provide easy access for investors into various asset classes that include domestic and foreign equities as well as gold.
What exactly are Exchange Traded Funds (ETFs)?
For those who are not familiar with ETFs, they are almost similar to mutual funds – only that they’re listed on exchanges such as Bursa Malaysia, and are traded like regular stocks.
While many ETFs track the performances of major indices like FBMKLCI30 or S&P 500, numerous others have an investment focus that provides exposure to a particular industry such as stocks in technology or healthcare companies, or specific asset class such as gold, Real Estate Investment Trusts (REITs) and so on.
For example, the FTSE Bursa Malaysia KLCI ETF, one of the first equities-based ETFs in Malaysia, comprises of the 30 largest Malaysian companies by market capitalisation which are constituents of FTSE Bursa Malaysia Kuala Lumpur Composite Index (KLCI) that include well-known companies such as Maybank Bhd, Public Bank Bhd, Tenaga, Top Glove, Maxis Bhd, Telekom Malaysia, and more.
By buying these ETF units, you will be investing in a basket of stocks from these 30 companies, rather than buying only some of the KLCI companies. Because of this diversification, ETFs are popular among casual and seasoned investors alike because they both reduce risk (spreading your investment across several stocks) and increase exposure to various industries from banking, telecommunication to real estate.
Besides that, ETFs also allow traders to tap into international markets while trading within Bursa Malaysia. For instance, the MyETF Dow Jones U.S. Titans 50 which is a Shariah-compliant ETF, is made up of the 50 largest companies (including Apple Inc) listed on the New York Stock Exchange (NYSE). By investing in MyETF Dow Jones U.S. Titans 50, you are essentially an indirect shareholder of Apple Inc – as well as 49 of the other top companies listed on the NYSE.
Since they are traded in stock markets, high-performing ETFs can appreciate in price on top of providing investors with dividends, making them an attractive long-term investment option. In Malaysia, three ETFs that stood out due to their outstanding performance in the last 12 months are:
1. TradePlus Shariah Gold Tracker
Investment focus: Physical gold
1-year total return: 28.65%*
As Malaysia’s first and only Shariah-compliant gold ETF, the TradePlus Shariah Gold Tracker empowers investors to invest in gold without the hassle of buying, storing, and selling gold bars. Unlike other investments that provide exposure into gold mining or gold-related companies, this ETF invests in gold bars. Interestingly, investors can also redeem this ETF’s units as physical gold as long as they meet the minimum requirements.
2. TradePlus S&P New China Tracker
Investment focus: Equities focusing on China’s New Economy
1-year total return: 23.88%*
The TradePlus S&P New China Tracker offers the flexibility to trade in USD or MYR and holds the distinction of being Malaysia’s only dual-currency ETF listed on Bursa. This ETF focuses on customer-centric companies of China’s New Economy – rather than manufacturing companies or banking corporations – and gives traders exposure to globally-recognised companies like Alibaba, Tencent, JD.Com, and Pinduoduo that have remained strong despite the economic effects of Covid-19.
3. MyETF MSCI Malaysia Islamic Dividend
Investment focus: Shariah-compliant Malaysia-listed stocks
1-year total return: 16.71%*
The MyETF MSCI Malaysia Islamic Dividend is backed by the performance of selected Shariah-compliant stocks listed on Bursa Malaysia that provide attractive dividend yield. The selection of companies for this ETF has passed MSCI’s (benchmark index) strict screening and are deemed able to continue generating above-average dividends.
*Source: Bloomberg as of 30 June 2020
In addition to the above, Bursa Malaysia also had on 15 July 2020, the listing of two NEW ETFs, namely:
1. TradePlus DWA Malaysia Momentum Tracker
Investment focus: Malaysian Equities
The TradePlus DWA Malaysia Momentum Tracker provides investors the opportunity to gain exposure to 20 stocks on Bursa Malaysia with the strongest price momentum that includes. companies in glove manufacturing (e.g. Top Glove, Hartalega), technology (e.g. Pentamaster, Globetronics), financial (e.g. Bursa Malaysia, Syarikat Takaful), and plantation (IOI Corporation, Kuala Lumpur Kepong Berhad). . The objective behind this strategy is to ride on the “upward strength” of these stock prices, with the view that the momentum will continue in the short to medium term.
2. TradePlus MSCI Asia ex Japan REITs Tracker
Investment focus: REITs listed in Asia ex-Japan
This ETF provides investors with the opportunity to invest in Real Estate Investment Trusts (REITs) listed across Asia (except Japan). REITs are known for their stable and consistent dividend yields, which makes it more appealing to low-risk investors. The TradePlus MSCI Asia ex-Japan REITs Tracker is listed on Bursa’s Main Market and trades in Malaysian Ringgit (MYR), giving Malaysians a chance to invest in the regional property managers while removing the hassle of trading in foreign markets and dealing with different currencies.
Find All The Information You Need At Bursa Marketplace
However, like all investments, investors should always do their due diligence and research before investing in ETFs. Similar to all listed instruments on the local bourse, ETFs are subject to stock market fluctuations, and therefore returns could vary. In addition, depending on their investment focus, different ETFs may carry different levels of investment risk.
That is why, in addition to providing ETFs for investors, Bursa Malaysia also has its own learning platform called Bursa Marketplace. Here, beginners and even intermediate investors will be able to learn more about investing in ETFs. Bursa Marketplace has a library of research done by licensed investment research companies as well as recommendations on whether to buy, hold, or sell your ETF units. You can get the most up-to-date and precise data if you’re looking to study current trends of ETF investments.
Now that you know what ETFs are and how they work, head over to Bursa Marketplace to discover the many types of ETFs available on the exchange.