SGX-listed ETF beats Nasdaq 100 as investors flock to S-E Asian markets

MANY investor dollars have gone into US tech stocks, which were driven to multiple new highs in the past year or so. 

But one Singapore Exchange-listed exchange-traded fund (ETF) focused on South-east Asian tech is doing so well it outperformed the Nasdaq 100.

This was the CSOP iEdge SEA+ Tech ETF, which had total returns net-of-fees of 30.4 per cent in 2024, SGX data indicated. In comparison, the Nasdaq 100 figure was around 25 per cent. 

CSOP was in the top three best-performing ETFs listed on the SGX for 2024, and recorded the second-highest net inflows for the year, SGX indicated.

The ETF, which tracks the iEdge South-east Asia+ Tech Index, has the largest tech companies in South-east Asia, among other holdings. 

As at Jan 13, the fund size stood at US$368 million, from US$274.4 million in 2024, CSOP said.

Factors behind the ETF’s outperformance

The manager of the ETF, Bruce Zhang, told The Business Times that significant foreign investor interest has been driven by the current interest rate cut cycle, geopolitical uncertainties and the region’s favourable demographics.

“South-east Asia, along with India, has a massive population, with a working-age population close to China’s total population. The demographic dividend is also reflected in demand, such as the increasing middle-income population, consumer demand and Internet penetration rate,” he said, adding that wage costs are competitive.

“This creates growth opportunities for many tech platforms, especially consumer platforms,” he added.

While expectations are for the US Fed to slow down rate cuts, the trajectory “has not changed”, said Zhang, adding that South-east Asian tech stocks have performed well historically during such periods due to inflows and borrowing costs.

SGX’s director of securities trading Kang Wei Chin said that many South-east Asian companies in this space were burning cash to gain market share. But now, they are at a stage of monetisation and increasing profits.

“This region is currently becoming the regional, global hub for (artificial intelligence),” he said, adding that foreign investments into Malaysia and Thailand are driving value across the tech sector. 

Geoff Howie, market strategist at SGX, added: “You think about South-east Asia, you think about good domestic demand, all the public infrastructure projects, the young population and the growing consumer middle class, so to speak.”

At the crucial heart of South-east Asia’s development for the last 10 years – and the next 10 – is digitalisation, he said.

Some companies have already reaped the benefits. For instance, Delta Electronics Thailand, one of the best-performing stocks in the region, has generated returns on par with Nvidia – that is, in the ballpark of 300 per cent over the last five years, Howie noted.

Delta Electronics Thailand is also in the top 10 holdings of the CSOP iEdge South-east Asia+ Tech Index.

“This ETF has worked because it ticks the boxes. It’s relevant and it’s somewhat thematic, making it easier for investors to be a little bit more active and precise in aligning their exposure to the new growth themes that excite them,” said Howie. “And that’s definitely digitalisation across South-east Asia, for sure.”

Holdings in the ETF also include consumer discretionary stocks such as Sime Darby and Jardine Cycle & Carriage.

Zhang said: “The boundaries between traditional industries and tech industries have become blurred with the advancement of technology and the application of AI. For example, it’s challenging to categorise an online consumer platform as belonging in the tech industry or consumer industry.”

So, tech aside, the ETF includes tech-related industries – even those in car manufacturing, electronic components and even retail and media services, he said.

Outlook

Howie of SGX indicated that there is optimism for the region ahead.

“The MAS (Monetary Authority of Singapore) October Macroeconomic Review maintained that in the years ahead, the Asean region is poised to maintain its significant role in the global electronics industry,” he said.

He noted that the review highlighted that Singapore and Malaysia possessed a “comparative advantage” in both the upstream and midstream segments of the electronics value chain.

“This includes the production of semiconductor equipment and integrated circuits, which complements the efforts of countries such as Vietnam, which specialise in the final assembly of consumer products such as smartphones,” Howie said.