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Singapore Exchange (SGX) on Monday launched the SGX APAC ex Japan Dividend Leaders REIT Index, comprising 30 real estate investment trusts (REITs) across the Asia Pacific region excluding Japan.
It will be the first SGX index to be used as a benchmark index for a new exchange-traded fund (ETF).
In addition, the index is the first of its kind that is composed entirely of REITs in the Asia Pacific region that are dividend weighted, as well as accessible through an ETF.
The dividend-weighted index measures the performance of REITs that pay the largest dividends within the Asia Pacific ex Japan region, providing investors with the opportunity to participate in a portfolio offering significant and sustainable yields.
According to SGX in a statement on Monday, the index’s total return over the 12 months to 29 July 2016 was 19.97%, demonstrating a yield over the same period of 4.53%.
The ETF will be issued by Phillip Capital Management, the asset management arm of Phillip Capital, and will be listed on SGX.
The SGX APAC ex Japan Dividend Leaders REIT Index captures over 70% of the region’s REIT universe by total capitalisation, taking into consideration size, free-float and liquidity.
All constituent weights are capped at 10% to ensure greater portfolio diversification. The index was designed and built using SGX’s in-house index engineering expertise, in consultation with Phillip Capital Management.
“The prospective ETF will offer investors transparent and low cost access to a diverse basket of quality REITs, many of which we have been investing in over the past decade through our actively-managed REIT funds,” says Jeffrey Lee, MD and Co-CIO of Phillip Capital Management.
“In view of the growing demand we see from our investors for sustainable income and the rise of passive investing, this is a highly opportune time to launch the first Asia Pacific REIT ETF comprising the region’s largest dividend-paying REITs,” Lee adds.
“I am delighted with the launch of our first Pan-Asian index and that it will be used as a benchmark for an ETF. As SGX’s first truly regional index, it broadens our offering beyond the Singapore equity market, demonstrating our continued push to provide investors access to diverse opportunities,” says Loh Boon Chye, CEO of SGX.
According to a PwC survey, the region’s ETF market is fast developing and poised for strong growth, with ETF assets in Asia expected to reach US$560 billion ($762 billion) by 2021.
This article first appeared in The Edge Singapore Market Report.