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TRANSCRIPT
Singapore Exchange
Index Solutions
SGX Index Edge
7 February 2018
Agenda
1. Introduction to Thematic Investing
2. SGX-Factset Thematic Indices Suite of 4 themes – Launched in Oct 2017
2 new upcoming themes – To be launched in 1H 2018
3. Challenges in Building Thematic Portfolios
4. Factset RBICs as a Powerful Data Source
5. Thematic Investing Trends in Asia
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Thematic Investing
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Thematic Solutions by SGX Index Edge
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Broadly speaking, thematic investing seeks to identify and capture the opportunities created by structural social, economic or demographic trends and their long-term secular influences on the world’s markets and economies.
These investments track the second- and third-order effects of structural trends that create hot spots of investment opportunities where significant amounts of capital could be concentrated.
By ignoring geographical boundaries, style biases and traditional sector classifications, it provides investors with a distinct strategic advantage to identify emergent and potentially rewarding investment trends and invest in the companies – from the downstream to upstream value chain – that are well positioned to benefit from it.
Enables investors to capture additional alpha by zeroing in on hot spots of investment opportunities where significant amounts of capital will be deployed.
Provides investors with a flexible way to validate and express their long-term views by applying a forward-looking perspective toward investing.
What is Thematic Investing?
Why Invest in Themes?
SGX-Factset Thematic Indices
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SGX-FactSet Thematic Indices
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The SGX-FactSet Global Cybersecurity Indexseeks to tap on the increased spending on cybersecurity, as spurred by the growing incidence and sophistication of cybercrime.
CybersecurityThe SGX-FactSet Asia Healthcare Select Equal-Weighted (EW) Index aims to provide exposure to Asian companies primed at targeting Asia’s growing health concerns and demographic trends.
Healthcare
The SGX-FactSet Global Robotics Indexseeks to track the performance of global securities with large revenue exposure to Robotics and Automation.
Robotics and AutomationThe SGX-Factset Asia Technology Advantage Equal-Weighted (EW) Index aims to get exposure to Asian securities with high annual revenues from forward-looking technology-related business segments that are poised for growth.
Technology Advantage
Launched in October 2017, the SGX-Factset Thematic series currently consists of four
thematic indices that provide investors with the ability to track some of the most dynamic
and interesting industries today:
Thematic Solutions by SGX Index EdgeSGX-Factset Global Robotics Index
The SGX-FactSet Global Robotics Index seeks to track the performance of global securities with large revenue exposure to Robotics and Automation, as manufacturing industries globally take to the productivity and sustainability accorded by robots.
Name of Index SGX-Factset Global Robotics Index
No. of Constituents 40
Currency USD
Base Date 26 September 2011
Base Value 1000
Weighting Free Float Capitalisation
Review Dates Semi-annually in Mar and Sep
Bloomberg Ticker SGXFR (Price Return)
Performance (as at 29 Sep 2017)
SGX-FactSet Global Robotics Index (TR) 1Y 3Y* 5Y*
Returns 38.27% 13.88% 20.91%
*Returns are reported on an annualised basis.
Risk Analysis
Company Name Country SEDOL Index Weight
NIDEC CORP JAPAN 6640682 7.09%
ROCKWELL AUTOMATION INC UNITED STATES 2754060 6.98%
FANUC CORP JAPAN 6356934 6.97%
KEYENCE CORP JAPAN 6490995 6.96%
PARKER HANNIFIN CORP UNITED STATES 2671501 6.89%
EMERSON ELECTRIC CO UNITED STATES 2313405 6.88%
METTLER-TOLEDO INTERNATIONAL UNITED STATES 2126249 6.74%
AMETEK INC UNITED STATES 2089212 6.45%
OMRON CORP JAPAN 6659428 4.50%
CDK GLOBAL INC UNITED STATES BQXTWQ5 4.00%
Top 10 Constituents
SGX-FactSet Global Robotics Index (TR) 1Y 3Y* 5Y*
Standard deviation* 7.16% 15.50% 14.87%
Sharpe Ratio 4.62 0.92 1.36
Maximum Drawdown -26.27% -39.28% -61.65%
Data updated as of 29 Sep 2017Private & Confidential7
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SGX-FactSet Global Robotics (PR) SGX-FactSet Global Robotics (TR)
*Standard deviations are calculated using monthly returns and reported on an annualised basis.
Thematic Solutions by SGX Index EdgeSGX-Factset Global Cybersecurity Index
The SGX-FactSet Global Cybersecurity Index seeks to tap on the increased spending on cybersecurity globally to strengthen fortification, as spurred by the growing incidence and sophistication of cybercrime.
Name of Index SGX-Factset Global Cybersecurity Index
No. of Constituents 30
Currency USD
Base Date 26 September 2011
Base Value 1000
Weighting Free Float Capitalisation
Review Dates Semi-annually in Mar and Sep
Bloomberg Ticker SGXFC (Price Return)
Performance (as at 29 Sep 2017)
SGX-FactSet Global Cybersecurity Index (TR) 1Y 3Y* 5Y*
Returns 28.47% 12.95% 17.63%
*Returns are reported on an annualised basis.
Risk Analysis
Company Name Country SEDOL Index Weight
PALO ALTO NETWORKS INC UNITED STATES B87ZMX0 7.19%
OTSUKA CORP JAPAN 6267058 7.17%
CHECK POINT SOFTWARE TECH UNITED STATES 2181334 7.09%
TREND MICRO INC JAPAN 6125286 6.91%
SYMANTEC CORP UNITED STATES 2861078 6.89%
FIREEYE INC UNITED STATES BD4R405 6.87%
PROOFPOINT INC UNITED STATES B6VDQC3 6.82%
FORTINET INC UNITED STATES B5B2106 6.58%
AMANO CORP JAPAN 6027304 4.57%
OSI SYSTEMS INC UNITED STATES 2111579 4.33%
Top 10 Constituents
SGX-FactSet Global Cybersecurity Index (TR) 1Y 3Y* 5Y*
Standard deviation* 12.93% 17.92% 16.22%
Sharpe Ratio 2.01 0.77 1.09
Maximum Drawdown -21.14% -32.39% -55.61%
Data updated as of 29 Sep 2017Private & Confidential8
*Standard deviations are calculated using monthly returns and reported on an annualised basis.
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SGX-FactSet Global Cybersecurity (PR) SGX-FactSet Global Cybersecurity (TR)
Thematic Solutions by SGX Index EdgeSGX-Factset Asia Healthcare Select EW Index
The SGX-FactSet Asia Healthcare Select EW Index aims to provide exposure to Asian companies primed at targeting Asia’s growing health concerns and demographic trends. These include the rising incidence of lifestyle diseases, obesity and aging population.
Name of Index SGX-Factset Asia Healthcare Select EW Index
No. of Constituents 40
Currency USD
Base Date 26 September 2011
Base Value 1000
Weighting Equal-weighted
Review Dates Semi-annually in Mar and Sep
Bloomberg Ticker SGXFHS (Price Return)
Performance (as at 29 Sep 2017)
SGX-FactSet Asia Healthcare Select EW Index (TR) 1Y 3Y* 5Y*
Returns 7.29% 9.77% 13.75%
*Returns are reported on an annualised basis.
Risk Analysis
Company Name Country SEDOL Index Weight
VIROMED CO LTD KOREA B0P5XC2 2.65%
ONO PHARMACEUTICAL CO LTD JAPAN 6660107 2.61%
TSUMURA & CO JAPAN 6906919 2.60%
SOSEI GROUP CORP JAPAN B01QMC2 2.60%
SAMSUNG BIOLOGICS CO LTD KOREA BYNJCV6 2.56%
SHIONOGI & CO LTD JAPAN 6804682 2.55%
ASAHI INTECC CO LTD JAPAN B019MQ5 2.55%
LUPIN LTD INDIA 6143761 2.55%
HANMI PHARM CO LTD KOREA B613DJ9 2.55%
NIPPON SHINYAKU CO LTD JAPAN 6640563 2.54%
Top 10 Constituents
SGX-FactSet Asia Healthcare Select EW Index (TR) 1Y 3Y* 5Y*
Standard deviation* 12.59% 13.17% 12.56%
Sharpe Ratio 0.62 0.77 1.09
Maximum Drawdown -13.90% -27.41% -46.46%
Data updated as of 29 Sep 2017Private & Confidential9
*Standard deviations are calculated using monthly returns and reported on an annualised basis.
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SGX-Factset Asia Healthcare Select EW Index (PR)
SGX-Factset Asia Healthcare Select EW Index (TR)
Thematic Solutions by SGX Index EdgeSGX-Factset Asia Technology Advantage EW Index
The SGX-Factset Asia Technology Advantage EW Index aims to get exposure to Asian securities with high annual revenues from forward-looking technology-related business segments that are poised for growth.
Name of Index SGX-Factset Asia Technology Advantage EW Index
No. of Constituents 50
Currency USD
Base Date 26 September 2011
Base Value 1000
Weighting Equal-weighted
Review Dates Semi-annually in Mar and Sep
Bloomberg Ticker SGXFTA (Price Return)
Performance (as at 29 Sep 2017)
SGX-FactSet Asia Tech Advantage EW Index (TR) 1Y 3Y* 5Y*
Returns 25.43% 10.61% 16.50%
*Returns are reported on an annualised basis.
Risk Analysis
Company Name Country SEDOL Index Weight
NOMURA RESEARCH INSTITUTE LTD JAPAN 6390921 2.11%
ALPS ELECTRIC CO LTD JAPAN 6021500 2.10%
SK HOLDINGS CO LTD KOREA B39Z8L3 2.09%
SAMSONITE INTERNATIONAL SA HONG KONG B4Q1532 2.08%
YAHOO JAPAN CORP JAPAN 6084848 2.07%
NEC CORP JAPAN 6640400 2.04%
QUANTA COMPUTER INC TAIWAN 6141011 2.03%
ADVANCED SEMICONDUCTOR ENGR TAIWAN 6056074 2.03%
PANASONIC CORP JAPAN 6572707 2.02%
NIPPON TELEGRAPH & TELEPHONE JAPAN 6641373 2.02%
Top 10 Constituents
SGX-FactSet Asia Tech Advantage EW Index (TR) 1Y 3Y* 5Y*
Standard deviation* 10.32% 13.04% 12.28%
Sharpe Ratio 2.26 0.84 1.31
Maximum Drawdown -21.77% -34.86% -51.30%
Data updated as of 29 Sep 2017Private & Confidential10
*Standard deviations are calculated using monthly returns and reported on an annualised basis.
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SGX-FactSet Asia Technology Advantage EW (PR)
SGX-FactSet Asia Technology Advantage EW (TR)
Upcoming Themes to be IntroducedSGX Global Internet-of-Things (IoT) Index
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Internet Software/Services
• Companies developing and marketing internet software and/or providing internet services including online databases and interactive services, as well as companies deriving a majority of their revenues from online advertising.
Internet Retail & Online Marketplace
• Companies that generate significant revenue from selling their products online.
• Companies that provide a platform for individual retailers to post and sell their products and/or services.
Online Travel & Hospitality Services
• Companies that provide global online platforms for travel and hospitality services.
Electronic Payment Processing
• Companies that provide electronic payment processing, and infrastructure/cloud services that facilitate the setup of e-commerce websites for their customers.
The SGX Global IoT Index is designed to select companies that have business exposure towards the following 4 themes:
Upcoming Themes to be IntroducedSGX Global Electric Vehicles (EV) Revolution Index
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EV-producing Automobile Manufacturers
Automobile manufacturers producing electric vehicles (EV) or hybrid vehicles.
Lithium Ion-Battery Producers
Manufacturers of Lithium-ion battery equipment and components
Miners
Miners of Lithium and other chemical components/metals required in the construction of Lithium-ion Batteries
The SGX Global Electric Vehicles (EV) Revolution Index is designed to select companies that have exposure toward the Electric Vehicle (EV) production value-chain:
Some Challenges in Building Thematic Baskets
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Some Challenges in Building Thematic Portfolios
Misrepresentations relative to stated objectives
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Name Weight BBG Ticker GICS Sector RBICS L6
Albemarle Corp 16.12% ALB US Equity Materials Other Additive Manufacturing
FMC Corp 15.87% FMC US Equity Materials Pesticide Manufacturing
Sociedad Quimica y Minera de Chile SA
7.07% SQM US Equity Materials Other Inorganic Chemical Makers
LG Chem Ltd 5.63% 051910 KS Equity Materials Petrochemical Manufacturing
EnerSys 5.20% ENS US Equity IndustrialsHeavy-duty and High-end Batteries Manufacturing
Panasonic Corp 5.10% 6752 JP Equity Consumer DiscretionaryAutomotive and Marine Electronics Manufacturing
Samsung SDI Co Ltd 4.93% 006400 KS Equity Information TechnologyHeavy-duty and High-end Batteries Manufacturing
GS Yuasa Corp 4.80% 6674 JP Equity Industrials -
Tesla Inc 4.68% TSLA US Equity Consumer Discretionary Car Manufacturer
BYD Co Ltd 4.67% 1211 HK Equity Consumer Discretionary Car Manufacturer
Top 10 constituents of a leading Lithium Index
RBICS - a Powerful Data Source
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Factset Revere Business Industry Classification System (RBICS)APPLE - RBICS Taxonomy: Level 1 - 6
Beyond Classification Systems
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Beyond Classification SystemsNeed to go beyond to arrive at a representative basket
Broad Eligible Universe for Index
Inclusion
Pure basket of e-Commerce/IoT stocks –
“Control” group
Identify stocks that have proven e-Commerce/IoTattributes based on RBICS revenue exposure
Historical Regression and Correlation Analysis
The broad universe was regressed against the “core” e-Commerce/IoT control basket, to systematically:
1- Identify stocks with highly correlated price movements to e-Commerce/IoT
2- Eliminate noise from the universe
FactSet Revere Classification
General Merchandise Retail
Electronics and Entertainment Retail
FactSet Industry Classification
Internet Retail
Internet Software/Services
Example: e-Commerce / Internet-of-Things The Factset RBICS provides an objective revenue-based assessment that can be used to first define a pure e-
Commerce/Internet-of-Things (IoT) “control group”.
With the “control group” identified, a triangulation approach can be employed to identify core “e-Commerce/IoT” companies through a combination of objective revenue-based assessment, industry classifications, and quantitative regression analyses so as to build a truly representative index basket.
Overlap
Thematic Investing Trends in Asia
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Thematic Investing Trends in Asia
As an engine of global growth, Asia has produced distinct structural investment themes that track transformative economic, social and market trends such as internet, technology and aging, presenting opportunities for investors with a long-term view to capitalize on these secular growth stories.
Traditionally, Asian investors are trading-oriented and prefer investing in single stocks.
By packaging investment themes – that track long-term economic, social and market trends – into ETFs, this innovative yet simple investment vehicle is likely to appeal to the trading mentality of Asian investors, with potential for explosive growth.
Asia8%
U.S. & Europe
92%
Breakdown of Thematic ETFs across the region
* Source: ETFGI and etf.com
Singapore ExchangeBeijing Hong Kong London Mumbai Tokyo
sgx.com
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