People pass stock index tickers at the Singapore Exchange
ETFs have seen rapid growth in the Singapore market over the past 2 years © Reuters

The Singapore Exchange has announced a collaboration with the New York Stock Exchange that will include efforts to develop new exchange traded funds, as well as environmental, social and governance products.

The two bourses signed a memorandum of understanding last week that outlines the focus areas of the partnership, which will include dual listings of companies on both exchanges and supporting index product development at SGX and NYSE affiliate company ICE Data Indices.

The agreement aims to “address the growing complex needs” of market participants and investors, according to Loh Boon Chye, chief executive of SGX Group.

“The collaboration with NYSE provides an opportunity for both exchanges to share information and trends, with the potential for product collaboration between issuers and across markets,” an SGX spokesperson said.

The partnership will also drive the development of new products in “high-demand areas such as ESG”, Lynn Martin, president of NYSE, said in a company statement.

The latest move by SGX to boost the Singapore ETF market follows an MOU signed with the Shenzhen Stock Exchange last December. The planned link-up with the China market focused primarily on the development of an ETF connection that would allow Singaporean and Chinese investors to access feeder ETFs listed locally on either of the exchanges.

The link, expected to launch some time this year, will initially be limited to equities ETFs, meaning many of the city-state’s largest ETFs, which are fixed income and real estate investment trust-focused products, will be excluded.

ETFs have seen rapid growth in the Singapore market over the past two years, with total ETF assets under management expanding by 47 per cent in 2021 to S$12.55bn ($9.19bn), after surging 57 per cent in 2020. There are currently 36 ETFs listed on the Singapore bourse.

Retail adoption of ETFs was a key driver in that asset growth, the SGX told Ignites Asia last November, growing by 40 per cent between October 2020 and October 2021, with robo-advisers and digital platforms being the fast-growing segment.

Equities ETFs saw net outflows in the first five months of the year, however, before registering S$11mn of inflows last month, while Chinese fixed-income ETFs saw net outflows of S$78mn in June after 25 straight months of inflows.

There have been just a handful of new ETF listings on the Singapore bourse over the past couple of years, including just two this year so far.

These are the NikkoAM-StraitsTrading MSCI China Electric Vehicles and Future Mobility ETF launched in January and the Lion-OCBC Securities Singapore Low Carbon ETF, which was rolled out in April.

Among the small number of ETFs listed in Singapore over the past two years, ESG and sustainability have become an increased focus.

The SGX has also been active in proposing ESG disclosure requirements for listed companies.

The bourse released a consultation paper last August that put forward climate-related disclosures as a requirement for listed companies as part of their sustainability reports.

It also announced a new platform called SGX First in December 2020 designed to promote sustainability initiatives and promote a wider uptake of ESG principles.

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