How To Invest In Lion-China Merchants Emerging Asia Select Index ETF, A Possible Gateway To Asia’s Rising Tigers

When it comes to investing, we all know the only free lunch is diversification. Singapore investors keen on diversifying their portfolios with exposure to emerging markets in Asia have a new option. 

The Lion-China Merchants Emerging Asia Select ETF, a new exchange-traded fund (ETF) by Lion Global Investors (LGI) and China Merchants Fund Management. 

If you’re looking to tap into the next generation of Asia’s rising tigers, here’s everything you need to know about the world’s first Singapore-dollar-denominated emerging Asia ETF that is set to go public soon.

(Editor’s note: For those who are unfamiliar, LGI is the team behind two of the most popular ETFs listed on the Singapore Exchange (SGX): Lion-Phillip S-REIT ETF and Lion-OCBC Securities Hang Seng TECH ETF.)

Read Also: Investing in REIT ETFs Listed In Singapore: 5 Things You Need To Know 

What’s the Lion-China Merchants Emerging Asia Select ETF About?

The Lion-China Merchants Emerging Asia Select ETF is a new tool for investors seeking growth and diversification in Emerging Asia. 

By investing in this ETF, you can tap into the dynamic economies of India, Malaysia, Indonesia, and Thailand (IMIT). This diversified approach allows you to spread your risk across a wide range of stocks and sectors within these four countries. 

The ETF’s focus on the 50 largest and most liquid companies in IMIT ensures exposure to industry leaders and promising growth opportunities.

Riding the IMIT Wave: Top Sectors, Countries, and Companies

The IMIT countries of India, Malaysia, Indonesia, and Thailand are primed to become the next Asian economic powerhouses. 

As you can see in the chart below, there is quite an even allocation between the countries. The United States allocation is made up of companies in IMIT countries, but chose to list in the US, for example, India-based HDFC Bank and ICICI Bank. 

The competitive edge of these economies lies in low labour costs and supportive business environments, enabling them to produce cost-effective exports and attract substantial foreign investment. 

Read Also: Guide To Investing In The Indian Stock Market’s Nifty 50 Companies

Unlike developed nations like the US, these emerging markets are characterised by youthful demographics and strong growth potential, making them attractive investment destinations.

Source: Lion Global Investors 

The Lion-China Merchants Emerging Asia Select ETF follows the iEdge Emerging Asia Select 50 Index, which tracks the 50 largest and most tradable companies that are domiciled in emerging Asia countries and listed in emerging Asia countries or on the US exchanges. 

Here’s a breakdown of the top sectors within the index: 

Source: Lion Global Investors (data as of 31 October 2024)

These are the top 10 companies within the Lion-China Merchants Emerging Asia Select ETF:

Source: Singapore Exchange (data as of 31 October 2024)

To ensure that the ETF is well-diversified, it adheres to the following caps:

• A 7% single stock weightage cap
• A 40% sector weightage cap
• A 50% country of domicile weightage cap

The Lion-China Merchants Emerging Asia Select ETF uses a direct replication or representative sampling strategy. This means it aims to hold all (or a representation) of the underlying stocks in the iEdge Emerging Asia Select 50 Index, helping the ETF closely track the index’s performance.

Here’s another key factor to consider: the expense ratio. This is the annual fee charged by the ETF to cover its management costs. The Lion-China Merchants Emerging Asia Select ETF’s expense ratio is yet to be confirmed, but we know the management fee is set at 0.8% per year. 

The Lion-China Merchants Emerging Asia Select ETF is classified as an Excluded Investment Product (EIP). This means investors do not have to specifically qualify to trade it, unlike a Specified Investment Product (SIP) such as the Daily Leverage Certificates (DLCs). 

Read Also: Guide To Singapore Depository Receipts (SDRs): How To Start Investing In Thai Stocks Through SGX

How to Buy the Lion-China Merchants Emerging Asia Select ETF?

The Lion-China Merchants Emerging Asia Select ETF is now in an Initial Offering Period (IOP). 

The IOP runs from 25 November 2024 to 6 December 2024. This means you can purchase units at the initial issue price of US$1 per unit (excluding fees) before it starts trading on the stock exchange. The lot size is just 1 unit. Think of the IOP as the IPO for companies, just that this is for an ETF. 

During the IOP, you can subscribe to the Lion-China Merchants Emerging Asia Select ETF via OCBC ATMs, mobile and online banking, or through any of the participating dealers below:

• OCBC
• POEMS
• DBS Vickers
• Tiger Brokers 
• FSMOne 
• Maybank Securities

Source: Lion Global Investors

The target listing date of the Lion-China Merchants Emerging Asia Select ETF on the Singapore stock market is 11 December 2024. Once listed, the SGX code for this ETF will be EAA, and it will be traded in Singapore dollars. 

On top of using cash, investors can also use their Supplementary Retirement Scheme (SRS) to invest after listing. 

Read Also: 5 Key Factors To Consider When Investing Our SRS Savings

Is The Lion-China Merchants Emerging Asia Select ETF Right For You?

The Lion-China Merchants Emerging Asia Select ETF offers a straightforward way to gain exposure to the growth potential of the IMIT countries of India, Malaysia, Indonesia and Thailand. 

However, like any investment, it carries risks. Market volatility, currency fluctuations, and geopolitical events can all impact the ETF’s performance. Therefore, it’s important to assess your risk tolerance before making any investment decisions. As always, do your thorough research and consult a trusted financial advisor if you’re unsure whether you should invest in this ETF. 

Read Also: 4 Low-Cost Chinese ETFs That You Can Invest On SGX

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