New Trading Market Trends with IntermarketAnalysis and ETFs · 2019. 3. 1. · 3 Digi.com Berhad 4 Singapore PressHoldings 5 ComfortdelgroCorp. 6 Maxis Berhad 7 MISC Berhad 8 PetronasGas

Trading Market Trends with

Intermarket Analysis and ETFs12 March 2017

Overview

1. Factors to consider when choosing ETFs

2. ETF liquidity – Traded Liquidity vs Implied Liquidity

3. Different types of ETFs

4. Putting it all together – how to start using ETFs in your portfolio

5. Business cycle and asset class rotation

6. Using market carpets to spot market trends

7. Market trends involving various asset classes

Factors to consider

when evaluating ETFs

Key factors for consideration

1. Underlying index tracked by the ETF

2. Replication method

3. Management fees / Expense ratio

4. Tracking error / tracking difference


The MOST IMPORTANT factor driving the performance of the ETF!

Source: Aminvest, as of 28 February 2017. Any securities mentioned herein are for illustration purposes only and should

not be construed as a recommendation for investment.


The underlying index tracked by the ETF provides you

a good idea of what are you investing in!

Source: CIMB Principal Asset Management, as of 28 February 2017. Any securities mentioned herein are for illustration purposes only and should



The underlying index tracked by the ETF provides you

a good idea of what are you investing in!

CIMB FTSE China 50 ETF

CIMB FTSE China 50 ETF



2. Replication Method (Physical replication)

Prospectus of FTSE Bursa Malaysia KLCI ETFProspectus of FTSE Bursa Malaysia KLCI ETF

The replication method gives you an idea

how the ETF tracks the underlying index.



2. Replication Method (Synthetic replication)

The replication method gives you an idea

how the ETF tracks the underlying index.



3. Management fees / Expense Ratio



Management fees / Expense ratio indicates

how much are you paying for the ETF.

4. Tracking error / Tracking difference



Tracking error or tracking difference indicates how much the

performance of the ETF is deviating from the index performance.

ETF liquidity

Traded liquidity vs Implied liquidity


� The true liquidity of an ETF is determined by how liquid the underlying index components are!

� It is useful for traded liquidity (i.e. traded volumes on the stock exchange) to be high as it makes it easier for smaller retail investors to enter / exit the ETF

� BUT MORE importantly, the liquidity of the underlying index components needs to be liquid – as this represents the TRUE POTENTIAL of the ETF’s liquidity.


ETF

Traded liquidity

Traded liquidity

Traded liquidity

Implied Liquidity on the

asset class

Traded liquidity Traded

liquidity


asset class


asset class

Current traded volume of FTSE KLCI ETF

An ETF with higher traded volumes makes it easier for

investors to enter/exit.

Bid / ask spread of FTSE KLCI ETF

An ETF with smaller bid-ask spreads make it easier for

investors to enter/exit.

The TRUE implied liquidity of FTSE KLCI ETF

Creation/Redemption Basket

size for 836,000 units

15-day average

daily traded volume

% of average daily

traded volume Ticker

1 British American Tobacco 400 241,000 0.2% ROTH MK

2 PPB Group Berhad 1,700 628,000 0.3% PEP MK

3 RHB Bank Berhad 2,500 3,675,000 0.1% RHBBANK MK

4 AMMB Holdings 5,200 6,474,000 0.1% AMM MK

5 CIMB Group Holdings 16,800 14,483,000 0.1% CIMB MK

6 Hong Leong Bank 1,900 1,068,000 0.2% HLBK MK

7 Hong Leong Financial Group 500 226,000 0.2% HLFG MK

8 Malayan Banking Bhd 16,600 13,671,000 0.1% MAY MK

9 Public Bank Bhd 9,200 4,796,000 0.2% PBK MK

10 Petronas Chemicals Group 8,500 8,049,000 0.1% PCHEM MK

11 Petronas Gas Bhd 2,300 1,380,000 0.2% PTG MK

12 Digi.com Bhd 11,100 5,809,000 0.2% DIGI MK

13 IOI Corp 9,900 6,441,000 0.2% IOI MK

14 Kuala Lumpur Kepong 1,600 1,360,000 0.1% KLK MK

15 KLCC Prop & KLCC Reits 800 1,265,000 0.1% KLCCSS MK

16 Astro Malaysia Holdings 5,400 1,997,000 0.3% ASTRO MK

17 Axiata Group 13,500 9,702,000 0.1% AXIATA MK

18 Genting Bhd 6,600 3,714,000 0.2% GENT MK

19 Genting Malaysia Bhd 8,400 8,424,000 0.1% GENM MK

20 Hap Seng Conso 1,000 283,000 0.4% HAP MK

21 IHH Healthcare Bhd 8,300 6,358,000 0.1% IHH MK

22 Maxis Bhd 7,800 2,835,000 0.3% MAXIS MK

23 MISC Bhd 4,400 2,927,000 0.2% MISC MK

24 Petronas Dagangan Bhd 800 478,000 0.2% PETD MK

25 IJM 9,400 3,678,000 0.3% IJM MK

26 Sime Darby Berhad 10,200 8,957,000 0.1% SIME MK

27 Telekom Malaysia 6,600 5,228,000 0.1% T MK

28 Tenaga Nasional Bhd 10,500 8,045,000 0.1% TNB MK

29 Westports Holdings 2,400 3,487,000 0.1% WPRTS MK

30 YTL Corp Bhd 13,300 4,166,000 0.3% YTL MK

Source: Aminvest, Bloomberg, as of 9 March 2017. Any securities mentioned herein are for illustration purposes only and should


Based on the

creation /

redemption basket

of FTSE KLCI ETF,

market makers are

able to trade large

volumes of this ETF

without much

market impact!

Based on the

creation /

redemption basket

of FTSE KLCI ETF,

market makers are

able to trade large

volumes of this ETF

without much

market impact!

Different types of ETFs

Equity ETFs, Bond ETFs, Smart Beta ETFs, Alternative

ETFs, Leveraged & Inverse ETFs, Actively managed ETFs

1. Equity ETFs (Broad market ETFs)

Example: FTSE Bursa Malaysia KLCI ETF




Example: SPDR S&P 500 ETF (Ticker: SPY)

Source: SPDR.com, as of 28 February 2017. Any securities mentioned herein are for illustration purposes only and should



Example: SPDR S&P 500 ETF (Ticker: SPY)

Source: Bloomberg, as of 28 February 2017. Any securities mentioned herein are for illustration purposes only and should


1. Equity ETFs (Industry Sector ETFs)

Example: Energy Select Sector SPDR (Ticker: XLE)

Source: SPDR.com, as of 28 February 2017. Any securities mentioned herein are for illustration purposes only and should


1. Equity ETFs (Industry Sector ETFs)

Example: Energy Select Sector SPDR (Ticker: XLE)

Source: Bloomberg, as of 8 March 2017. Any securities mentioned herein are for illustration purposes only and should


2. Bond ETFs

Example: ABF Malaysia Bond Index Fund



2. Bond ETFs

Example: iShares 7-10 Year Treasury Bond ETF

Source: iShares BlackRock, as of 28 February 2017. Any securities mentioned herein are for illustration purposes only and should


2. Bond ETFs

188.4188.4

214.6214.6

Source: Bloomberg, as of 31 December 2016. 1 Performance figures are based on the NAV prices of the ETFs and are presented in MYR terms assuming the reinvestment of

dividends (if any). Any securities mentioned herein are for illustration purposes only and should not be construed as a recommendation for investment. Past performance is not

indicative of future performance.

Example: iShares Barclays USD Asia High Yield Bond Index ETF

iShares Barclays USD Asia Credit Bond Index ETF

90.00

110.00

130.00

150.00

170.00

190.00

210.00

230.00

Dec 11 Dec 12 Dec 13 Dec 14 Dec 15 Dec 16

Performance (MYR) Dec 2011 – Dec 2016

iShares JPMorgan USD Asia Credit Bond Index ETF

iShares Barclays USD Asia High Yield Bond Index ETf

Calendar Year Performance (MYR)1

2012 2013 2014 2015 2016

17.5% 9.2% 12.7% 27.8% 16.1%

2012 2013 2014 2015 2016

10.5% 4.5% 16.5% 25.0% 11.1%

iShares JPM USD Asia Credit Bond Index

iShares Barclays USD Asia HY Bond Index ETF

� What are ‘Smart Beta’ ETFs?

� A type of ETF that tracks an index that is constructed using different rules instead of the typical market cap-weighted strategy.

� Example of ‘Smart Beta’ ETFs:

� High dividend oriented ETFs

� Low volatility ETFs

� Growth factor ETFs

� Value factor ETFs

� High Quality Companies ETFs

2. Smart Beta ETFs

2. Smart Beta ETFs

Source: MyETF.com.my, as of 28 February 2017. Any securities mentioned herein are for illustration purposes only and should


Example: MyETF MSCI Malaysia Islamic Dividend ETF (Ticker: MEMMID)

2. Smart Beta ETFs

Source: MyETF.com.my, as of 28 February 2017. Any securities mentioned herein are for illustration purposes only and should


Example: MyETF MSCI SEA Islamic Dividend ETF

Top 10 holdings

1 Singapore Telecom

2 Telekomunikasi Indonesia

3 Digi.com Berhad

4 Singapore Press Holdings

5 Comfortdelgro Corp.

6 Maxis Berhad

7 MISC Berhad

8 Petronas Gas

9 Singapore Post Ltd

10 Westport Holdings

32.8%

19.8%

15.9%

7.0%

6.4%

6.1%

4.8%

4.2%

1.9%

Telecom

Consumer Discretionary

Industrials

Financials

Healthcare

Materials

Utilities

Consumer Staples

Info Tech

� Offers exposure to the MSCI AC ASEAN IMI Islamic High Dividend Yield 10/40 index – which represents the dividend yield opportunity within Southeast Asia’s Shariah equity market.

3. Alternative ETFs (Commodity ETFs)

Source: www.spdrgoldshares.com, as of 28 February 2017. Any securities mentioned herein are for illustration purposes only and should


Example: SPDR Gold Shares (Ticker: GLD)




Example: SPDR Gold Shares (Ticker: GLD)


Source: www.uscfinvestments.com, as of 28 February 2017. Any securities mentioned herein are for illustration purposes only and should


Example: United States Oil Fund (Ticker: USO)





Beware of the futures

rolling effect for

commodity ETFs that invest

in commodity futures!

Beware of the futures

rolling effect for

commodity ETFs that invest

in commodity futures!

4. Leveraged & Inverse ETFs

� What are ‘Leveraged’ and ‘Inverse’ ETFs?

� ‘Leveraged’ ETFs are funds that uses financial derivatives to amplify the daily returns of an underlying index.

� ‘Inverse’ ETFs are funds that uses financial derivatives to provide the inverse of the daily returns of an underlying index.

4. Leveraged ETFs

Source: www.proshares.com, as of 28 February 2017. Any securities mentioned herein are for illustration purposes only and should


Example: ProShares Ultra S&P 500 (Ticker: SSO)

4. The problem with leveraged ETFs

Day 0Day 0

Equity Index Value= 100Equity Index Value= 100

Leveraged ETF Value= 100Leveraged ETF Value= 100

Day 1Day 1

Equity Index Value= 110 (+10%)Equity Index Value= 110 (+10%)

Leveraged ETF Value= 100 + (+10% x 2)= 120

Leveraged ETF Value= 100 + (+10% x 2)= 120

Day 2Day 2

Equity Index Value= 100 (-9.1%)Equity Index Value= 100 (-9.1%)

Leveraged ETF Value= 120 + (-9.1% x 2)

= 98.2

Leveraged ETF Value= 120 + (-9.1% x 2)

= 98.2

Leveraged ETFs are not meant to be held for more than a single day!

4. Leveraged ETFs



Example: ProShares Ultra S&P 500 (Ticker: SSO)

4. Inverse ETFs



Example: ProShares Short S&P 500 (Ticker: SH)

4. Inverse ETFs

Source: Bloomberg, as of 8 Mach 2017. Any securities mentioned herein are for illustration purposes only and should


Example: ProShares Short S&P 500 (Ticker: SH)

4. Inverse Bond ETFs



Example: ProShares Short 7 – 10 Treasury ETF (Ticker: TBX)

5. Volatility-based ETFs

Source: Invesco PowerShares, as of 28 February 2017. Any securities mentioned herein are for illustration purposes only and should


Example: PowerShares S&P 500 Low Volatility Portfolio (Ticker: SPLV)

5. Volatility-based ETFs



Example: PowerShares S&P 500 Low Volatility Portfolio (Ticker: SPLV)

6. Actively managed ETFs

Source: www.spdrs.com, as of 28 February 2017. Any securities mentioned herein are for illustration purposes only and should


Example: SPDR DoubleLine Total Return Tactical ETF (Ticker: TOTL)

6. Actively managed ETFs



Example: SPDR DoubleLine Total Return Tactical ETF (Ticker: TOTL)

Putting it all together

How you can start using ETFs in your portfolios

ETFs listed on Bursa Malaysia

� There are currently 8 listed ETFs on Bursa Malaysia.

Source: Bursa Malaysia, as of 28 February 2017. Any securities mentioned herein are for illustration purposes only and should


No Name of ETF Fund Manager

Underlyinginvestment

1 FTSE Bursa Malaysia KLCI ETF AmFunds Malaysia equities

2 CIMB FTSE ASEAN 40 Malaysia CIMB PAM Regional equities

3 CIMB FTSE China 50 CIMB PAM China equities in HK

4 MyETF DJIM25 i-VCAP Shariah Malaysia

equities

5 MyETF MSCI Malaysia Islamic Dividend i-VCAP Shariah Malaysia

equities

6 MyETF MSCI South East Asia Islamic

Dividend

i-VCAP Shariah regional

equities

7 MyETF Thomson Reuters Asia Pacific ex

Japan Islamic Agribusiness

i-VCAP Shariah regional

equities

8 ABF Malaysia Bond Index Fund AmFunds Malaysia bonds

1. FTSE Bursa Malaysia KLCI ETF

� Offers exposure to the top 30 Malaysian companies

� Semi-annual dividend distributions (KLCI dividend yield ~ 3.1%)

� P/E ratio ~17.0x (Equity yield ~5.9%)

Source: FTSE, AmInvest, as of 28 February 2017. Any securities mentioned herein are for illustration purposes only and should


24.2%

11.8%

10.3%

10.3%

7.7%

6.6%

5.3%

4.5%

4.4%

4.3%

3.9%1.5%

5.2%Banks

Utilities

Industrial Goods & Services

Telecom

Food & Beverage

Travel & Leisure

Construction & Materials

Real Estate

Health Care

Oil & Gas

Chemicals

Personal & Household

Others

Top 10 holdings

1 Public Bank

2 Malayan Banking

3 Tenaga Nasional

4 Sime Darby Bhd

5 CIMB Group Holdings

6 Petronas Chemicals Group

7 Genting

8 Axiata Group

9 Digi.com

10 IHH Healthcare

2. CIMB FTSE ASEAN 40 Malaysia

� Offers exposure to the FTSE ASEAN 40 (top companies within the ASEAN countries)

� Annual dividend distributions

Source: CIMB PAM Malaysia, as of 28 February 2017. Any securities mentioned herein are for illustration purposes only and should


Top 10 holdings

1 DBS Group Holdings

2 OCBC Bank

3 Singapore Telecom

4 United Overseas Bank

5 PTT


7 Public Bank

8 Bank Central Asia

9 Siam Cement

10 Astra International

30.5%

22.4%

21.9%

18.9%

6.1%

Singapore

Thailand

Malaysia

Indonesia

Philippines

3. CIMB FTSE China 50

� Offers exposure to the FTSE China 50 index – which represents the top 50 largest and most liquid Chinese stocks traded on HK Exchange

Source: CIMB PAM Malaysia, as of 28 February 2017. Any securities mentioned herein are for illustration purposes only and should


Top 10 holdings

1 Tencent Holdings

2 China Construction Bank

3 China Mobile

4 Industrial and Commercial

Bank of China

5 Bank of China

6 Ping An Insurance

7 China Petroleum & Chemical

8 China Life Insurance

9 CNOOC

10 PetroChina

53.1%

13.1%

11.6%

9.5%

6.1%

3.6% 1.2% 1.0% 0.8%

Financials

Energy

Telecom

Technology

Industrials

Consumer Goods

Utilities

HealthCare

Materials

4. MyETF Dow Jones Islamic Market Malaysia Titans

25 (DJIM 25)

� Offers exposure to the DJIM25 index – which represents Malaysia-based companies that comply with the methodology established by Dow Jones for screening stocks that comply with Shariah principles.

Source: MyETF.com, as of 28 February 2017. Any securities mentioned herein are for illustration purposes only and should


Top 10 holdings

1 Tenaga National Berhad

2 Sime Darby Berhad

3 IHH Healthcare Berhad

4 Axiata Group Berhad

5 Petronas Chemicals Group

6 IOI Corp

7 Digi.com

8 Kuala Lumpur Kepong Berhad

9 Telekom Malaysia

10 Petronas Gas

59.6%16.9%

12.5%

5.8%

3.3%

0.9% 0.7%0.5%

Trading/Services

Industrial Products

Plantations

Infrastructure

Construction

Consumer

Technology

Others

5. MyETF MSCI Malaysia Islamic Dividend

� Offers exposure to the MSCI Malaysia IMI Islamic High Dividend Yield 10/40 index – which represents the dividend yield opportunity within Malaysia’s Shariah equity market.



Top 10 holdings

1 Maxis Berhad

2 Axiata Group Berhad

3 Digi.com Berhad

4 MISC Berhad

5 Top Glove Corp. Berhad

6 Petronas Gas

7 Bermaz Auto Berhad

8 UOA Development Berhad

9 Westports Holdings

10 Hartalega Holdings

41.7%

25.5%

9.0%

8.8%

7.5%

2.9%

2.5% 1.6%0.5%

Trading/Services

Industrial Pdts

Infrastructure

Properties

Consumer

Finance

IPC

Technology

Others

6. MyETF MSCI SEA Islamic Dividend

� Offers exposure to the MSCI AC ASEAN IMI Islamic High Dividend Yield 10/40 index – which represents the dividend yield opportunity within Southeast Asia’s Shariah equity market.



Top 10 holdings

1 Singapore Telecom


3 Digi.com Berhad

4 Singapore Press Holdings

5 Comfortdelgro Corp.

6 Maxis Berhad

7 MISC Berhad

8 Petronas Gas

9 Singapore Post Ltd

10 Westport Holdings

32.8%

19.8%

15.9%

7.0%

6.4%

6.1%

4.8%

4.2%

1.9%

Telecom

Consumer Discretionary

Industrials

Financials

Healthcare

Materials

Utilities

Consumer Staples

Info Tech

7. MyETF Thomson Reuters Asia Pacific ex Japan

Islamic Agribusiness � Offers exposure to the Thomson Reuters Asia Pac ex Japan Islamic

Agribusiness index – which is made up of 30 largest stocks listed in the Asia Pac exchanges that are in agriculture-based industries



Top 10 holdings

1 The A2 Milk Company

2 Bega Cheese Ltd

3 Charoen Pokphand Indonesia

4 China Shengmu Organic Milk

5 Costa Group Holdings

6 Felda Global Ventures

7 Fonterra Co-Operative Group

8 Freedom Goods Group

9 Genting Plantations

10 IJM Plantations

47.3%

42.7%

6.2%3.8%

Food Processing

Fishing & Farming

AgriculturalChemicals

Otheres

27.3%

25.9%17.0%

10.5%

10.4%

3.5%

2.7%1.5%

1.2%

Malaysia

Australia

Indonesia

New Zealand

Hong Kong

Taiwan

South Korea

Thailand

Philippines

8. ABF Malaysia Bond Index Fund

� The only bond ETF listed on Bursa Malaysia

� Offers individual investors to get immediate exposure to a portfolio of mainly Malaysian government bonds.

Top 5 holdings

1 Malaysia Govt Bond July 2024

2 Malaysia Govt Bond Nov 2021

3 Malaysia Govt Bond Oct 2020

4 Malaysia Gov Bond Mar 2019

5 Malaysia Govt Bond Sep 2022

(as of 28 Feb 2017) Portfolio Yield Modified Duration

Actual Portfolio 3.92% 5.60 years

Benchmark 3.95% 5.58 years

Source: AmInvest, as of 28 February 2017. Any securities mentioned herein are for illustration purposes only and should


Achieve immediate diversification using ETFs

MalaysiaStock B

MalaysiaStock A

MalaysiaStock C

KLCI ETF

ABF Malaysia

BondETF

Stock AKLCI ETF

ABF Malaysia

BondETF

Stock B

Stock C

++ ==

Existing portfolioExisting portfolio ETFsETFsDiversified Core &

Balanced Portfolio

Diversified Core &

Balanced Portfolio

ETFs can be used in combination with stocks to

build a diversified core and low cost portfolio!

Different risk profiles of investors

Equities, 30%

Bonds, 70%

Equities, 50%

Bonds, 50%

Equities, 70%

Bonds, 30%

Conservative

Portfolio

Conservative

Portfolio

Balanced

Portfolio

Balanced

Portfolio

Aggressive / Growth

Portfolio

Aggressive / Growth

Portfolio

Depending on your risk profile, you can use a combination of

ETFs and stocks to build a suitable portfolio

Building ETFs into your portfolio:

Core-Satellite approach

China equities

(China 50 ETF)

Agribusiness stocks(ETF)

Satellites

CORE

MalaysiaStock B

KLCI ETF

ABF Malaysia

BondETF

MalaysiaStock A

Oil Sector Stocks (ETF)

U.S. equities

(ETF)

Stock C

Stock D Stock E

Stock E

Satellites

How adding a bond ETF can stabilise your portfolio

Source: Bloomberg, as of 28 February 2017. Any securities mentioned herein are for illustration purposes only and should not be construed as a recommendation for

investment. Performance are presented in MYR terms, assuming reinvestment of dividends if any. Past performance is not indicative of future performance.

60.00

80.00

100.00

120.00

140.00

160.00

180.00

Jul 07 Jul 08 Jul 09 Jul 10 Jul 11 Jul 12 Jul 13 Jul 14 Jul 15 Jul 16

Effect of adding bonds to stabilize your portfolioTotal Return from Jul 2007 to Feb 2017 (MYR)

100% FTSE Bursa Malaysia KLCI ETF

70% FTSE KLCI ETF + 30% ABF Malaysia Bond Index ETF

30% FTSE KLCI ETF + 70% ABF Malaysia Bond Index ETF

144.7144.7

151.0151.0

149.6149.6

Portfolio Total Return

Volatility (% p.a.)

100% FTSE KLCI ETF 51.0% 12.9%

70% KLCI ETF + 30% ABF Malaysia Bond ETF 49.6% 9.3%

30% KLCI ETF + 70% ABF Malaysia Bond ETF 44.7% 5.1%

A simpler way of investing – using ETFs to get

exposure to other equity markets

Malaysia equities have gone nowhere in the last 3 years.

But Malaysian investors are not limited to Malaysia equities!

80.00

90.00

100.00

110.00

120.00

130.00

140.00

150.00

160.00

Dec 13 Mar 14 Jun 14 Sep 14 Dec 14 Mar 15 Jun 15 Sep 15 Dec 15 Mar 16 Jun 16 Sep 16 Dec 16

Performance (in MYR terms) Dec 2013 – Dec 2016

FTSE KLCI ETF CIMB FTSE China 50 ETF CIMB FTSE ASEAN 40

134.0134.0

101.8101.8

117.5117.5

Source: Bloomberg, as of 31 December 2016. Any securities mentioned herein are for illustration purposes only and should not be construed as a recommendation for

investment. Performance are presented in MYR terms, assuming reinvestment of dividends if any. Past performance is not indicative of future performance.

Business cycle and asset class rotation

The typical business cycle

Source: Fidelity Investments, as of 28 February 2017.

Sector rotation and investing across a cycle

Source: MyETF.com.my, as of 28 February 2017.

Using market carpets to spot market

trends

Technical Analysis on ETFs

Source: Bloomberg, as of 31 December 2016. 1 Performance figures are based on the NAV prices of the ETFs and are presented in MYR terms assuming the reinvestment of

dividends (if any). Any securities mentioned herein are for illustration purposes only and should not be construed as a recommendation for investment. Past performance is not

indicative of future performance.

www.stockcharts.com

Market trends involving various

asset classes

Market trend of USD vs Commodities

Source: Bloomberg, as of 28 February 2017. The US Dollar is represented by the DXY index. Global Commodities is represented by the Bloomberg Global Commodities Index.

Performance are presented in USD terms. Past performance is not indicative of future performance.

60

70

80

90

100

110

120

130

0

50

100

150

200

250

Dec 00 Dec 02 Dec 04 Dec 06 Dec 08 Dec 10 Dec 12 Dec 14 Dec 16

Performance of USD vs Global Commodities

Global Commodities US Dollar

0

50

100

150

200

250

0

500

1000

1500

2000

2500

3000


Performance of Global Equities vs Global Commodities

Global Equities Global Commodities

Market trend of Global Equities vs Commodities

Source: Bloomberg, as of 28 February 2017. Global Equities is represented by the MSCI World Index. Global Commodities is represented by the Bloomberg Global Commodities

Index. Performance are presented in USD terms. Past performance is not indicative of future performance.

Market trend of Stocks vs Commodities

Source: Bloomberg, as of 28 February 2017. Global Equities is represented by the MSCI World Index. Global Commodities is represented by the Bloomberg Global Commodities

Index. Performance are presented in USD terms. Past performance is not indicative of future performance.

40

50

60

70

80

90

100

110

120

130

500

1000

1500

2000

2500

3000

3500


Performance of US stocks vs US Dollar

S&P 500 (US stocks) US Dollar

Market trend of Bonds vs Commodities

50

70

90

110

130

150

170

190

210

230

250

100

150

200

250

300

350

400

450

500

550


Performance of Global Bonds vs Global Commodities

Global Bonds Global Commodities

Source: Bloomberg, as of 28 February 2017. Global Bonds is represented by the Barclays Global Aggregate Index. Global Commodities is represented by the Bloomberg Global

Commodities Index. Performance are presented in USD terms. Past performance is not indicative of future performance.

Market trend of Global Equities vs Global Bonds

Source: Bloomberg, as of 28 February 2017. Global Equities is represented by the MSCI World Index. Global Bonds is represented by the Barclays Global Aggregate Index.

Performance are presented in USD terms. Past performance is not indicative of future performance.

0

100

200

300

400

500

600

0

500

1000

1500

2000

2500

3000

Dec 0

0

May 0

1

Oct 01

Mar

02

Aug 0

2

Jan 0

3

Jun 0

3

Nov 0

3

Apr

04

Sep 0

4

Feb 0

5

Jul 05

Dec 0

5

May 0

6

Oct 06

Mar

07

Aug 0

7

Jan 0

8

Jun 0

8

Nov 0

8

Apr

09

Sep 0

9

Feb 1

0

Jul 10

Dec 1

0

May 1

1

Oct 11

Mar

12

Aug 1

2

Jan 1

3

Jun 1

3

Nov 1

3

Apr

14

Sep 1

4

Feb 1

5

Jul 15

Dec 1

5

May 1

6

Oct 16

Performance of Global Equities vs Global Bonds

Global Equities Global Bonds

76

Thank You

“ Everyone’s Market-in-the-Pocket”

www.bursamarketplace.com

Appendix

Introduction to ETFs

(what, how and why)

What is an ETF?

� ETF stands for Exchange Traded Funds

� ETFs are funds that are bought / sold on the stock exchange

� Buy / sell on the stock exchange (only pay brokerage fees to buy and sell)

� Transacted via a broker

� Same settlement process as stocks traded on the exchange

� As a fund, ETFs can be made up of a portfolio of

� Stocks,

� Bonds,

� Commodities

Interaction between ETFs, stock

exchange and investors

Exchange Traded Funds

Stock

Exchange

Investor

Investor

Portfolio of stocks

Portfolio of

commodity futures

Investor

Portfolio of bonds

Key features of ETFs

INDEX TRACKER

ETFs are passively

managed to track

an index

(e.g. an equity

index or bond

index)

LOW COST

ETFs have

significantly

lower fees and

expenses than

most investment

products

TRANSPARENT

& PREDICTABLE

ETFs are fully

transparent; Full

portfolio holdings

are available daily

How does an ETF track an index?

A unit of the ETF

ETFs seeks to ‘mirror’ the index they are tracking.

ETF Index

How does an ETF track an index?

4 methods of tracking an index:

� Full ReplicationInvesting all or substantially all of its assets in the constituents of the index, broadly in proportion to the respective weightings of the constituents in the index.

� Sampling ApproachBy dividing an index into manageable key risk elements so as to replicate the performance of the underlying index.

� Optimisation ApproachBy investing in a portfolio that has a high correlation to the index and index constituents to minimise tracking error.

� Synthetic ReplicationThrough the use of financial derivatives or embedded derivatives to derive the index performance.

Invests in

physical

securities

Examples of well known equity indices

� FTSE Bursa Malaysia KLCI Index (Malaysia equities)The FTSE Bursa Malaysia KLCI Index represents the top 30 companies by market capitalization on Bursa Malaysia’s Main Board.

� S&P 500 (U.S. equities)A market capitalization weighted index of 500 stocks listed in the U.S. This index is designed to measure performance of the broad U.S. domestic economy through changes in the aggregate value of 500 stocks representing major industries.

� MSCI AC Asia ex Japan (Asian equities)MSCI AC Asia ex Japan Index captures the performance of large and mid-cap companies across 2 Developed Market countries and 8 Emerging Market countries in Asia. With 626 constituents, the index covers approximately 85% of the free-float adjusted market capitalization in each country.

� MSCI World (Global equities)The MSCI World captures large and mid cap representation across 23 developed markets countries. With 1,645 constituents, the index covers approximately 85% of the free-float adjusted market capitalization in each country.

ETFs when compared to other investments

ETFs allow investors to achieve instant diversification with small

amount of capital at a low cost!

Benefits of ETFs

Why ETFs are a power investment tool

ETFs dominates trading on the US stock market

Source: Bloomberg, as of 13 Jan 2017.

Did you know?

In 2016, 7 out of the top 10 traded securities on US exchanges are ETFs!

Growth and evolution of ETFs

Equity ETFs

Bond ETFs

Alternative

ETFs

Source: © 2016 Blackrock, Inc., iShares, as of 31 December 2016

Why are ETFs increasingly popular?

Simple way of

investing

(less work,

and it’s

cheaper too)

ETFs perform

better than

many

professional

managers

Longevity of

investing in an

index

Longevity of investing in an index

Trivia Question:

Since the start of the Dow Jones Index in the U.S. (back in

1896), how many companies have continued to remain in

the index today?


Answer:

Only ONE company – General Electric.

Early days of Dow Jones Industrial Average

� Dow Jones Industrial Average was first calculated on 26 May 1896 comprising only 12 industrial companies.

� Founded by Charles Dow and his associate, Edward Jones.

American Cotton Oil Co.Distilling & Cattle Feeding

Co. North American Co.

American Sugar Co. General ElectricTennessee Coal, Iron and

Railroad Co.

American Tobacco Co. Laclede Gas Co. U.S. Leather Co.

Chicago Gas Co. National Lead Co. United States Rubber Co.

Original companies in Dow Jones Industrial Average, May 1896

Source: Dow Jones Indices, as of 28 February 2017. Any securities mentioned herein are for illustration purposes only and should



3M Co. Cisco Systems Home Depot Merck & Co. UnitedHealth

American Express

Coca-Cola Co. Intel Corp. Microsoft United Tech

Apple E.I. Du Pont IBM Corp. Nike Inc. Verizon Comm

Boeing Co. Exxon MobilJohnson & Johnson

Pfizer Inc. Visa Inc.

Caterpillar General Electric JPMorgan ChaseProcter & Gamble

Wal-Mart Stores

Chevron Corp. Goldman Sachs McDonald’s Travelers Cos. Walt Disney Co.

Dow Jones Industrial Average, August 2016

Allied Signal Caterpillar General Electric McDonald’s Texaco Inc.

Alcoa Inc. Chevron Corp. General Motors Merck & Co. Union Carbide

American Express

Coca-Cola Co. Goodyear Minnesota Mining United Tech

AT&T E.I. Du Pont IBM Corp. Philip Morris Walt Disney Co.

Bethlehem Steel Eastman KodakInternational

PaperProcter & Gamble

WestinghouseElectric

Boeing Co. Exxon Mobil JPMorgan Chase Sears Roebuck Woolworth

Dow Jones Industrial Average, May 1991

Over a period of 25 years, 50% of the components

in the index have changed.

Source: Dow Jones Indices, as of 13 August 2016. Companies highlighted in red above illustrate the difference in the constituents of

the Dow Jones Industrial Average between Aug 2016 and May 1991. Any securities mentioned herein are for illustration purposes only and should not be

construed as a recommendation for investment.

Remember this company?

Back in 1976, Kodak controlled 90% market

share of photographic sales in the U.S.

Due to the rise of digital photography,

Kodak filed for bankruptcy in Jan 2012.

Companies come and go . . .

But the stock market index always remains!

Disruptive technologies affecting local companies

Are we seeing the end of cable TV?

The last legs of the fossil-fuel era?

Reinventing the retail shop?

Stock picking is getting harder for the average investor!

Many ETFs perform better than professional

managers

“ Over a 10 year period,

82.1% of large-cap professional asset managers

have failed to outperform the

S&P 500 index. ”

Source: SPIVA report, S&P Dow Jones Indices, as of 31 Dec 2014.

Documents

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