As of now, currency ETF investing remains somewhat
underappreciated by most. The space has just over three dozen
funds, and a paltry amount in assets across all of the products
in the segment.
This is starting to slowly change though, as more ETF
providers have sought to launch new funds in the segment with
some decent success. In fact, 11 currency
have at least $100 million in assets while another five have at
least $50 million under management, suggesting a decent level of
interest in some corners of the space.
However, the vast majority of the capital currently invested
in the space flows through into just a handful of G-10
currencies. These include widely-traded ones like the dollar,
euro, yen, and the pound, which make up the vast majority of the
current forex ETF market.
Beyond that, the currency ETF space has also moved beyond the
G-10 and into other big economies and their currencies. These
, and now thanks to CurrencyShares, Singapore as well (read
Can Anything Stop These Southeast Asia ETFs?
CurrencyShares, a segment of Guggenheim Investments, has just
debuted America's first ETF that focuses on the Singaporean
Singapore Dollar Trust (
The product looks to track the price of the Singaporean dollar,
net of expenses, which come to 40 basis points a year.
FXSG/Singaporean Dollar in Focus
The ETF looks to provide long exposure to the Singaporean
dollar, appreciating when the currency goes up against the U.S.
dollar, and down when Singapore's dollar declines against the
The currency is controlled by the Monetary Authority of
Singapore (MAS), the nation's central bank. This government
authority has the ability to regulate all elements of the
country's monetary, financial, and banking programs.
The nation doesn't utilize a pure free-float currency system
though, as the MAS allows the Singaporean dollar to float in an
undisclosed band against a secret basket of the country's major
trading partners. This is important for a small country that must
import many natural resources, while it also helps to keep
exports competitive against many of its main rivals in the
While Singapore is often overlooked by U.S. investors in favor
of other markets in the region, the country, and its currency,
are vital to Southeast Asia. Singapore represents the business
heart of the region, and it is one of the most impressive growth
stories over the past 50 years (read
5 ETFs for Countries with Highest Employment
Singapore was at one point just a small fishing village in a
favorable location, but a series of pro-trade economic policies
changed all that. Despite a total lack of natural resources,
Singapore averaged growth
of 8% from 1960-2010
, catapulting the country into economic prominence.
Today, the average per-capita GDP is over $60,000 while
exports are over $350 billion, putting the country into the top
15 in the world for both measures. Thanks to this and the
relative lack of progress in its neighbors in the region, the
currency of Singapore is arguably the most important-and
stable-currency in the Southeast Asia region (read
ETFs for the Most Competitive Countries on
This could make FXSG an interesting choice for investors
seeking a relatively low volatility currency that targets this
increasingly important region, although huge gains seem unlikely
in this product. It could also make for a good choice for
investors seeking to hedge out some currency risk in a portfolio,
or for those seeking to go beyond China, Australia, and the G-10
in their currency investments.
Can It Succeed?
It is hard to say how this ETF will do in terms of
accumulating assets. Currency ETFs are, generally speaking, less
popular than other types of funds on the market so there will
certainly be a bit of a struggle initially.
Still, the ETF is certainly priced right and its first mover
advantage could help its quest in obtaining AUM. It also doesn't
hurt that the Singaporean dollar has done quite well-adding about
12% in the past five years-so this fund could surprise, although
it could take a while to get some traction given how well stock
markets have been performing lately.
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MKT VEC-RENMINB (CNY): ETF Research Reports
WISDMTR-CH YUAN (CYB): ETF Research Reports
ISHARS-SINGAPOR (EWS): ETF Research Reports
CRYSHS-AUS DOLR (FXA): ETF Research Reports
(FXSG): ETF Research Reports
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